RBS was rescued through a 45.5 billion pound government bailout during the 2008/9 financial crisis, leaving taxpayers holding an 81 percent stake in the bank.

European regulators on Wednesday agreed a proposal that would see RBS buy itself out of the dividend access share, which gives the state priority over dividends and has been seen as a major obstacle to full privatisation.

"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 taxpayer's money back," Chancellor George Osborne said in a statement on Wednesday.

(Reporting by Matt Scuffham; Editing by Simon Jessop)