RBS would move to London if Scotland breaks away -minister

* Cable says independence would see bank make London switch

* Says greater stability of UK system would drive relocation

* RBS (LSE: RBS.L - news) is central to debate over Scotland's future currency

* RBS says it is "politically neutral" over independence

By William James and Matt Scuffham

LONDON, Feb 5 (Reuters) - Britain's Royal Bank of Scotland would "inevitably" move its headquarters from Edinburgh to London if Scotland votes for independence later this year, Business Secretary Vince Cable said on Wednesday.

Scotland will hold a referendum in September on whether to end its 307-year union with England, with polls showing around 42 percent planning to vote against independence and 29 percent in favour.

Cable said the greater stability offered by Britain's established financial system and regulation would tempt the bank to move its base to England.

"I think if you were managing RBS you would almost certainly want to be in a domicile where your bank is protected against the risk of collapse," Cable told a panel of lawmakers.

"I think they already have a substantial amount of their management in London and I would have thought that inevitably they would become a London bank."

Britain pumped 45 billion pounds ($73 billion) into RBS to keep it afloat during the 2008 financial crisis, leaving taxpayers with an 81 percent shareholding in what was briefly the world's biggest bank following a huge expansion led by its former chief executive Fred Goodwin.

Since its rescue, RBS been embroiled in scandals ranging from the mis-selling of U.S. home loans to the attempted rigging of benchmark interest rates.

It is not expected to return to private hands for another three to five years, according to banking industry and political sources, raising further question marks over whether it could remain domiciled in Scotland.

The bank employs 12,000 staff north of the border and is still headquartered in Gogarburn, to the west of Scottish capital Edinburgh, where around 3,200 staff are located in a complex featuring shops and restaurants that became a symbol of Goodwin (LSE: GDWN.L - news) 's excesses.

Although its senior managers have been based in London since the bailout, previous chief executive Stephen Hester had spoken of strong emotional ties between the bank and Scotland.

RBS declined to comment on whether a vote for independence would lead it to leave Edinburgh and said it was "politically neutral" on the issue of independence.

"We don't support political parties or political movements. We will respond to what voters decide and governments agree," it said in a statement on Wednesday.

Cable's remarks put RBS at the centre of the political debate between London and the Edinburgh over how independence would work - much of which is focused on finance and currency.

How the bank would handle a possible split is one of many unanswered questions concerning Scotland's well-developed financial sector, which accounts for around 7 percent of its economic output and directly employs almost 85,000 people.

Scottish nationalists are basing their economic plans on keeping the pound by creating a currency union, but Britain sees that as a highly unlikely outcome.

The British government has said there is no clear economic rationale for a currency union and warned that such an arrangement could create financial problems similar to those suffered by the euro zone.

KEEPING STERLING

Last week, Bank of England Governor Mark Carney said an independent Scotland that keeps the pound would have to give up some national sovereignty to create a banking union to protect against a financial collapse.

Cable echoed those concerns on Wednesday, highlighting the importance of RBS to the debate over whether a currency union would be feasible because of its sheer size relative to the Scottish economy.

Scotland's GDP is estimated at around 130 billion pounds ($212 billion) while at the end of September RBS had assets of 1.1 trillion pounds.

"That, almost by definition, creates a high level of potential instability which that currency union would have to address," Cable said.

He said that after taking into account the implications of a banking union, he thought it would be in Scotland's own interests to create a new currency.

"The problems of a currency union with an independent Scotland are so difficult... that it would almost certainly prove to be in Scotland's interests, and indeed the rest of the UK, that Scotland did have its own currency," he said.

On Tuesday BP, Britain's second biggest oil company, warned against Scotland voting for independence, saying it would create uncertainty over Scotland's future currency and mean additional costs.