Royal Bank of Scotland is to pay the UK government £1.5bn ($2.5bn) to cancel an arrangement that sees it give the state priority over dividends.

The move, ratified by the EU on 9 April, brings the lender closer to privatisation, as the arrangement made RBS stock less attractive to private investors.

"This is another important step on the road to a more resilient banking system and in dealing with the problems of the past to get taxpayers’ money back," said UK finance minister George Osborne.

Following the financial crass, the UK government bailed out RBS to the tune of £45.8bn, giving the taxpayer an 81% shareholding in the bank.

The cancellation of the dividend access share deal will enable RBS to resume dividends to existing investors but the lender said it had no immediate plans to.

CEO Ross McEwan said: "Today’s agreement is a vote of confidence in the progress we have made in rebuilding RBS and in our plan for the bank’s future.

How well do you really know your competitors?

Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.

Company Profile – free sample

Thank you!

Your download email will arrive shortly

Not ready to buy yet? Download a free sample

We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form

By GlobalData
Visit our Privacy Policy for more information about our services, how we may use, process and share your personal data, including information of your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.

"We now need to get on with building an RBS that can earn the trust of our customers and help change UK banking for the better."

Shares in RBS closed at £3.10 on 9 April, meaning that if the government sold its stake now, the loss to the taxpayer would be £18bn.

Lloyds Banking Group was also bailed out during the crisis but has made a much stronger recovery and is currently expected to be privatised by May 2015.

Related articles:

Deutsche Pfandbriefbank to stick to 2015 privatisation timetable

Spanish government to sell 7.5% in state-backed Bankia

UK government realized value for money by divesting Lloyds’ shares: NAO