RBS to spin off stake in third-party investment arm

In a continued effort to consolidate its non-core businesses, RBS is in talks to spin off one of its last-remaining investment arms, reports Sky News' City editor Mark Kleinman.

The RBS Special Opportunities Fund (SOF) could be handed over to the lender's management team, with a deal finalised by the end of the year. The move comes as banks downsize principal investment businesses, in the face of increased capital regulations and an intensified public spotlight.

Chancellor George Osborne is putting pressure on RBS to establish a focus on consumer and small business lending.

The bank holds a 13.5 per cent direct stake in the SOF, which describes itself as "a discreet £1.1bn third-party fund".

RBS has been referred to City watchdog the Financial Conduct Authority over claims that it made a profit from forcing good businesses into difficulties in order to strip their assets. Yesterday the bank's chief executive, Ross McEwan, said it has called in lawyers from Clifford Chance to investigate the claims.

In the wake of the RBS, Co-op Bank and payday lenders scandals, Osborne faced fresh demands today over clamping down on banks. Calls from parliament to toughen his new banking regulations were heard this morning, including a crack down on bonuses and levying harsher reforms on rule-breaking lenders.