LONDON/BRUSSELS Oct 7 Britain told European regulators in July it was considering a break-up of part-nationalised Royal Bank of Scotland, pre-empting tough European Union rules on state support for banks which came into effect in August.
The UK Treasury's early notification means European regulators will examine any proposals on an RBS break-up under the old EU rules, potentially making it easier to executive.
"We made a precautionary notification to the European Commission in July of a potential restructuring measure at RBS," a Treasury spokesman said on Monday.
The Treasury, assisted by investment bank Rothschild, is considering whether RBS, 82 percent owned by taxpayers following a 45.5 billion pound ($73.1 billion) 2008 bailout, should hive off its riskiest loans into a separate legal entity, leaving the rest of the bank better placed to lend.
But the new EU rules would have required the bank to put a cap on the earnings of RBS executives and prevented the government buying out minority shareholders, making the plan much harder to implement.
New Chief Executive Ross McEwan would have seen his pay more than halved under the new regulations, which limit executive pay to 15 times the average national salary or 10 times that of the average employee at the bank.
The Treasury's early notification means European regulators are likely to examine any proposals on an RBS break-up under the old EU rules.
"The new rules apply to state aid notified to the Commission as of 1 August 2013," said Antoine Colombani, spokesman for EU antitrust chief Joaquin Almunia, who also confirmed receipt of the July filing.
A source with knowledge of government thinking said the July notification was "precautionary" and not meant to prejudice the outcome of the Treasury and Rothschild's review, which is expected to be made public later this month.
Analysts had expected the Treasury to decide against enforcing a breakup. They argued it was not needed since RBS had already wound down or sold off the vast majority of its bad loans and that state aid rules and the need for approval from RBS's minority investors would make the plan unworkable.
($1 = 0.6221 British pounds) (Reporting by Matt Scuffham. Editing by Jane Merriman)