Royal Bank of Scotland, the parent of the UK private bank, Coutts, is to consider a £3 billion ($4.9 billion) to £4 billion share issue to reduce the stake it would hand to the government for joining its toxic assets insurance scheme and has approached its biggest investors about the idea, according to the Financial Times.

Plans are “tentative” and Stephen Hester, RBS’s chief executive, is still “putting out feelers” to its shareholders about a “modest-sized” share issue, according to a person familiar with the situation, media reports said.

Such a decision would see RBS join Lloyds Banking Group in scrambling to raise capital to limit the use of what banks involved in the government’s new asset protection scheme view as a costly “bad bank” programme.

Governments in the UK, Europe and US have taken stakes in banks hit by the credit crunch. Over the past 12 months, a number of financial groups have started to move towards repaying some public funds, however.