UK FINANCIAL Investments' outgoing chairman Robin Budenberg said the body successfully resisted Government attempts to curb pay at the part-nationalised banks as he revealed it is working on plans to offer Royal Bank of Scotland shares to retail investors.

Speaking as a downgrade by investment bank Goldman Sachs sent RBS's shares down 2.4% yesterday, Mr Budenberg said the organisation, which was set up to manage the Treasury's banking investments at arms-length, also delayed the sale of RBS's US arm Citizens

The former investment banker with UBS told MPs: "There were suggestions that bonuses were far lower than what I considered to be commercially sustainable."

He said of Chancellor of the Exchequer George Osborne: "He accepted our arguments and we ended up with outcomes broadly speaking where the banks could continue to operate on a commercial basis and the remuneration results were sustainable externally."

But he told the Treasury committee he would not disclose UKFI's conversations with directors of Lloyds Banking Group, owner of Bank of Scotland, and RBS on the issue. "I do not believe the best way to protect the stakeholders that we have to make too much noise about those sorts of things in public," he said.

Earlier this month, RBS outlined an accelerated sell off of Citizens Bank in the United States from 2014.

Mr Budenberg revealed UKFI had resisted "pressures" from the Government for an earlier exit, arguing for more time for the bank to turn around and market conditions to improve. "The timing for the IPO (initial public offering) is probably much better in terms of creating shareholder value that it would have been had these steps been taken two or three years ago," he said.

He revealed UKFI had played a central role in the surprise exit of Stephen Hester, who left at the end of October after five years, by suggesting the change to chairman Sir Philip Hampton and senior independent director Sir Sandy Crombie.

"I think they were clearly thinking about what the right timing of management succession was," he said.

He added: "I think it was certainly important in terms of acceleration."

James Leigh-Pemberton, who will become executive chairman of UKFI in January, said the outcome of new RBS chief executive Ross McEwan's strategic review, due in February, would be a crucial part of the investment case for the reprivatisation of the bank.

But he said the revised overhaul could lead to any earlier sale.

Mr Budenberg revealed UKFI is looking at ways of allowing retail investors to buy some of the Government's stake alongside institutional investors to increase the size of any disposals.

"That is a topic of which we have already sought to give some thought in terms of structure in how to achieve that," he said.

Shares in RBS, which have slumped in recent weeks, closed down 8.2p at 331.6p as Goldman Sachs cut its stance from "buy" to "neutral".