By Matt Scuffham
LONDON (Reuters) - Royal Bank of Scotland has cut itself free from an 8 billion-pound ($13 billion) capital tie to the British government, it said on Tuesday, following recent moves to strengthen its capital base.
The ending of the Contingent Capital Facility marks another step along the road to getting RBS in shape for the government to eventually start selling off its 82 percent stake, which it acquired after pumping 45.5 billion pounds into the bank during the 2008 financial crisis.
"It is further evidence of the progress we have made in making RBS safer and stronger, with dramatically improved liquidity and capital positions," the bank said.
The facility had acted as an additional buffer whereby the government would have provided further equity capital if the bank's Core Tier 1 capital solvency ratio fell below 5 percent of risk-adjusted assets.
Its cancellation spares RBS from paying the Treasury the further 320 million-pound fee that would have been owed had the facility remained open.
In November RBS had said that it would create an internal 'bad bank' to fence off its riskiest assets, part of a raft of measures designed to heal its relationship with the government and speed up its privatization.
The government also said at that time it would remove the Contingent Capital Facility, set up in 2009, one year ahead of plan.
RBS and the government are also in advanced talks with the European Commission to free it from government rights to receive an enhanced dividend ahead of other investors once the bank returns to profit.
($1=0.6136 British pounds)
(Reporting by Matt Scuffham; Editing by Steve Slater and Greg Mahlich)