The Treasury said Tuesday it had sold 630 million shares, representing 5.4 percent of the bank, for 2.1 billion pounds (3 billion euros, $3.3 billion).

London sold its shares at a loss compared to what it paid for them in 2008, when it rescued RBS with 45.8 billion pounds of taxpayer money and secured a nearly 80 percent stake in the bank in return.

The sale was made to institutional investors after trading closed on Monday. RBS shares closed around 337 pence, so the deal with London was done at a 2.3 percent discount.

'Right thing to do'

Finance Minister George Osborne defended the government's decision to restore RBS to private ownership, saying the proceeds would be used to pay down the national debt.

"While the easiest thing to do would be to duck the difficult decisions and leave RBS in state hands, the right thing to do for the economy and for taxpayers is to start selling off our stake," Osborne said.

cjc/hg (AFP, AP, Reuters)