Lloyds TSB is to sell off its Lerwick branch under a European Commission edict designed to improve competition between banks.
It will go along with 184 other branches across Scotland within the next four years. In all, 600 branches will be sold across the UK.
Customers are expected to be offered to transfer their accounts across the street to the Bank of Scotland, which is owned by Lloyds.
The sell-off was agreed as part of a deal struck between the bank, Chancellor Alistair Darling and European competition commissioner Neelie Kroes.
In light of the Treasury’s injection of £17 billion to rescue the bank, the EU had demanded the sell-off to comply with state aid rules.
A Lloyds TSB spokeswoman said: “The Lloyds Banking Group, together with HM Treasury, has now finalised the terms of its restructuring plan with the European Commission.
“The ultimate decision in respect of state aid will be taken by the College of Commissioners and is expected to be before the end of the year.
“We expect that our final restructuring plan will consist of the sale of a retail banking business with at least 600 branches, a 4.6 per cent share of the personal current accounts market in the UK and up to approximately 19 per cent of the group’s mortgage assets.”