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* UK's Osborne to detail plans for Lloyds and RBS
* Bank of England's King to give final speech as governor
* Mansion House speech follows parliament bank criticism
By David Milliken and Matt Scuffham
LONDON, June 19 (Reuters) - The fate of Britain's twostate-controlled banks will become clearer on Wednesday, whenfinance minister George Osborne is likely to start the clockticking for the sale of the government's stakes.
But while Osborne will attempt to point to a healthierfuture for Britain's economy and banking sector in his annualspeech to financiers in the evening, reminders of recenttroubles will not be far away.
An influential panel of legislators called for new laws onWednesday to make it easier to jail reckless bankers. Speakingalongside Osborne will be Bank of England Governor Mervyn King,whose disdain for investment banking is clear.
Moreover, although Britain's economic recovery looks to beon a firmer footing than a few months ago, it is still sluggishand vulnerable to a global slowdown, and would benefit from abanking industry better-placed to support business investment.
Britain's previous Labour administration pumped 66 billionpounds ($103 billion) of public money into Royal Bank ofScotland and Lloyds Banking Group in 2008 tosave them from collapse at the height of the global financialcrisis.
Osborne's Conservative-led government has pledged to returnthem to the private sector, but has not set a date - somethingwhich should change later on Wednesday when he speaks at MansionHouse, the Lord Mayor of London's grand official residence.
Osborne said in a radio interview on Tuesday that he wouldannounce "exactly what we intend to do both in the Royal Bank ofScotland and in Lloyds" in the speech.
But he left himself plenty of wiggle room on the precisetiming, noting that the exact dates of the stake sales woulddepend on market conditions.
Selling some of the government's 81 percent stake in RBS and39 percent in Lloyds before Britain's next national election inMay 2015 could help support Conservative claims that it has gotBritain's economy on the mend.
Lloyds presents the easier task. Its share price is close tothe level at which the public would recoup the money ploughedinto the bank.
Industry and political sources have told Reuters that astaged sale to financial institutions is the most likely option,with 10 percent of the bank potentially up for grabs this year.
RBS UNCERTAINTY
The future of RBS is less clear following the ousting ofChief Executive Stephen Hester last week, a move which had thebacking of Britain's finance ministry.
Although Prime Minister David Cameron said last month he was"open to ideas" over an RBS sell-off, its shares remain wellbelow the government's break-even level, with taxpayerscurrently sitting on a loss.
Ed Balls, Labour's finance spokesman, said the disposal ofRBS risked turning into an electorally driven fire-sale.
The Parliamentary Commission on Banking Standards, set up bythe government last year after Barclays was found tohave manipulated global interest rate benchmarks, also saidOsborne should immediately consider alternative options for RBS.
Some commission members have advocated hiving off RBS'stoxic loans into a 'bad bank' leaving the remaining 'good bank'better able to lend to British businesses and households.
BoE Governor King has also said that it would have beenbetter to have rapidly restructured RBS in 2008 and 2009 andsold it on, as happened to banks in the United States.
On Wednesday night, King will be in valedictory mode, givinghis last speech before stepping down at the end of the month, tobe succeeded by former Canadian central bank chief Mark Carney.
As such, economists said King was likely to focus on theneed for firm bank regulation - where he has backed tougherleverage rules than Osborne favours - rather than to announce anew support scheme for the economy, as happened last year.
Last year's Mansion House speech brought the Funding forLending Scheme, a joint project of Osborne and King's. It offersbanks cheap credit and has made mortgages easier to get but hasyet to spur greater business investment.
