Royal Bank of Scotland (LSE: RBS.L - news) (RBS) is to embark on a further restructuring of its investment banking arm in a move that will pave the way for the departure of the unit's chief executive.
I have learned that RBS executives are at an advanced stage of preparations for splitting its markets and international banking arm (M&IB), which employs more than 16,000 people around the world, into two separate divisions.
The split, which could be announced within days, would mean that the heads of the two divisions will now report directly to Stephen Hester, RBS's chief executive.
Alongside news of the restructuring, and assuming that the plans are approved by RBS's board, it will also announce that John Hourican, chief executive of the M&IB business, is to leave the bank.
Mr Hourican's departure will end more than four years in the role, in which he has overseen one of the most radical restructurings of an investment bank ever attempted.
Formerly the chief financial officer of ABN Amro, the Dutch bank which RBS bought as part of a consortium in a spectacularly ill-fated deal in 2007, Mr Hourican has engineered a vast reduction in the level of risk-weighted assets on RBS's balance sheet.
Earlier this month, it was reported that Mr Hourican would leave RBS to satisfy demands from regulators for senior scalps as part of the taxpayer-backed lender's settlement with UK and US authorities over the manipulation of Libor, the interbank borrowing rate.
A settlement could be announced next week, although it is more likely to be confirmed at the end of January, City sources said.
RBS insiders have acknowledged that Mr Hourican was unaware of any wrongdoing by the bank's employees in relation to its role in setting benchmark interest rates, but said the division of M&IB into two units meant that the bulk of his work had now been completed.
Shares awarded to Mr Hourican in previous years are likely to vest on his departure from the bank, although he would not receive a payoff other than his contractual entitlement.
Mr Hester is understood to have given Mr Hourican his backing in recent weeks and is said to be keen that the latter's departure is not connected to any Libor-related wrongdoing by RBS staff.
Speculation suggested that Peter Nielsen, head of RBS's markets business within M&IB, would also be asked to resign by the bank's board.
I understand, however, that Mr Nielsen’s departure has not been agreed either internally or with regulators, and that he may not leave in the near future.
RBS's investment bank was given the M&IB name after a previous restructuring that involved the sale or closure of the parts of its operations which advised on areas such as mergers and acquisitions activity.
Previously called global banking and markets (GBM), it has been reduced in size to the extent that the investment bank now accounts for approximately 20% of RBS's risk-weighted assets, which provide one measure of the risk on a bank's balance sheet, compared to about 60% five years ago. The number of people working in the division has also come down from about 26,000 to roughly 16,000.
RBS will need to undertake a further year of wider balance sheet restructuring before it can begin to resemble what directors have called "a normal bank".
The future of RBS's investment banking business has become increasingly contentious in recent months as British banks come under pressure to raise the level of their protective capital buffers.
The Financial Services Authority wrote to Mr Hester last autumn to suggest that the M&IB business could be scaled back much further, and that view is understood to have the support of some board directors.
Although it is the most controversial area of RBS's business and the banking sector in general, the investment bank has yielded more than £10bn of profit since RBS was rescued by British taxpayers in 2008.
After Mr Hourican's departure, the terms of which are not yet finalised, the two M&IB units are likely to be run by John Owen, who heads international banking, and either Mr Nielsen or Suneel Kamlani, Mr Hourican's deputy.