Now a year in the job, the 57-year-old New Zealander is battling to re-build the reputation of the bank, which was rescued by a 45 billion-pound government bailout in 2008 and has since been plagued by scandals ranging from the alleged manipulation of benchmark interest rates to the current international probe into foreign exchange markets.

The bank, which was fined $612 million over the interest rate affair last year, is one of six banks now in talks with Britain's financial regulator to settle allegations its staff were involved in the rigging of the global $5 trillion-a-day currency market.

McEwan told a financial industry conference in London on Tuesday that RBS was braced for further litigation and conduct costs over the next 18 months but would then be in a position to look at restarting dividend payments.

"I look forward to getting to a point in the next 18 months or so where the past conduct issues are substantially behind us. We need to get ourselves through those before we see a real path to paying a sustainable dividend," he told the Bank of America Merrill Lynch Annual Banking and Insurance CEO conference.

McEwan said in July that the currency market investigation could prove a bigger problem for banks than the probe into whether banks tried to manipulate benchmark interest rates such as the London interbank offered rate (Libor).

RBS is also being investigated by regulators looking into its treatment of struggling small British firms and its selling of bonds backed by residential mortgages in the United States. Separately it has set aside 4.6 billion pounds so far to compensate customers mis-sold loan insurance and small businesses wrongly sold interest rate hedging products.

Shares in RBS rose by as much as 5 percent on Tuesday after the bank also said it expected to report an improved third-quarter performance but fell back to trade 1.6 percent higher at 367 pence by 1337 GMT. That leaves taxpayers still sitting on a loss of 12 billion pounds, making a sale of the government's 80 percent stake unlikely in the short term.

However, Jefferies analyst Joe Dickerson said RBS could be in a position to resume dividend payments in 2015, which in turn would lift the share price and improve the prospects of the bank returning to private ownership.

"I think that they'll settle the bulk of their litigation exposure well within an 18-month timeframe ... that leads me to believe that they could probably pay an interim dividend next year," he said.

Dickerson expects forecasts for RBS's profit to increase by at least 15 percent for the period between 2014 and 2016.

THIRD-QUARTER IMPROVEMENT

The bank said in a trading statement that in its third-quarter results it would release 800 million pounds from provisions set aside to cover losses on bad loans, after an improvement in economic conditions, especially in Ireland.

However, revenues in its corporate and institutional banking unit, which includes its shrunken investment bank, had been weaker than expected in the quarter.

The bank said it expected losses from bad loans for the full year to be "significantly" lower than its previous forecast of 1 billion pounds, helped by improving asset prices.

RBS is selling assets from its "bad bank" quicker and at better prices than it had expected. That means it does not need to set aside as much for the assets in its RBS Capital Resolution (RCR) unit, which was set up this year to sell off or run down some 29 billion pounds of assets it no longer wants.

It will release about 500 million pounds of the money it had set aside for RCR in the third quarter, much of it related to commercial real estate assets in Ireland. RBS had set aside 4.5 billion pounds to cover losses in RCR.

Its Irish unit Ulster Bank will also release about 300 million pounds in provisions in the same quarter.

RBS said if market conditions remained favourable it could cut its provision pot further and accelerate the wind-down of RCR assets. It had planned to run it down by the end of 2016.

(Additional reporting by Huw Jones; Editing by Mark Potter and Greg Mahlich)

By Matt Scuffham and Steve Slater