UKFI says UK is closer to sale of RBS stake - UPDATE

The UK is closer to selling part of its stake in bailed-out Royal Bank of Scotland, a senior official of the body charged with looking after government stakes in bailed-out banks said on Tuesday.

Oliver Holborn,.head of capital markets at UK Financial Investments (UKFI), reportedly told a hearing of the parliamentary Treasury Select Committee that the organisation was receiving more interest from financial institutions about investing in RBS.

He said investors had told him they believed RBS chief executive Ross McEwan had made good progress in turning around the bank, which is now about 81%-owned by the British government after taxpayers bailed it out in the financial crisis.

But Holborn told lawmakers that UKFI would need more information on legal issues facing RBS before launching a share sale.

RBS is facing several issues including allegations about its treatment of small firms and its sale of mortgage-backed bonds in the US.

The shares were 8.5p up at 360.4p at 12:54 on Tuesday, well short of the government's 502p a share buy-in price.

UKFI also reportedly told lawmakers that the British government blocked RBS from paying some staff bonuses worth twice their salaries to head off a public outcry.

Treasury officials intervened to keep bonuses equal to salaries after UKFI recommended that RBS should be allowed to pay higher rewards to help it attract and keep top staff.

The government blocked the higher bonuses using EU rules stating that banks can only pay bonuses of twice the level of salary with shareholder approval, although ironically it is challenging the new regulations in the European courts.