Royal Bank of Scotland, which owns the UK private bank Coutts, has confirmed it has sold its 4.26 per cent equity holding in Bank of China for £1.6 billion, as the bank follows other Western financial institutions in selling Chinese bank assets to raise capital.

RBS’s share sale had been widely trailed by the media.

“The decision to sell the stake forms part of the ongoing strategic review of the group’s businesses announced in October. After taking account of tax and the effects of currency hedging, the impact of this disposal on the group's capital ratios is expected to be broadly neutral,” Edinburgh-based RBS said in a statement.

RBS said it will continue to operate its network of branches across China in areas including wealth management as well as global banking and markets, transaction services and retail banking.

The selloff comes just over three years after RBS bought a £900 million stake in BoC in August 2005, leading a consortium which acquired a total of 10 per cent of the bank’s capital. The RBS stake was diluted to 4.26 per cent following the flotation on the Hong Kong and Shanghai stock exchanges.  

Last week, Bank of America, which recently completed its purchase of Merrill Lynch, sold its 2.5 per cent stake in China Construction Bank for $2.8 billion. UBS has sold its entire stake in Bank of China for $835 million.