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Small companies that hold business bank accounts with Royal Bank of Scotland (RBS) have been waiting to find out whether they will have their accounts moved elsewhere.

The government has now confirmed plans to break up the lender, which was recently rescued by tax-payers. The proposal was triggered after the 70% nationalised bank responded to demands from the European Commission (EC) to sacrifice up to 10% of its small business banking customers.

Lloyds has also been affected by the shake-up, after it was revealed that a further £30 billion of taxpayers' money will be injected into the pair. In return, the banks have agreed to follow strict guidelines on staff pay, bonuses and lending.

The Treasury said: "To promote greater competition in UK banking, and meet EU state aid rules, the banks will be required to make divestments of significant parts of their businesses over the next four years.'

Sir Richard Branson has shown an interest in the bank assets up for sale, which could allow him to expand his banking business. However, Spanish banking giant Santander ' owner of Abbey, Alliance & Leicester and Bradford & Bingley ' has been rumoured as a possible bidder for RBS bank business banking counterpart.

RBS has announced that it will be selling its branches in England and Wales, its Scottish NatWest branches, parts of its investment banking operations and its Churchill and Direct Line insurance arm.

RBS is currently the UK's largest lender to small to medium-sized businesses, with 1.2 million small business banking customers, and many suggest it offered the best business bank accounts in the industry.