Royal Bank of Scotland has done a £600 million 'pre-IPO investment' deal with a consortium including the Church of England Commissioners to pave the way for a flotation of the 314 branches it failed to sell to Santander earlier this year.

New York-based private equity firms Corsair and Centerbridge, along with the church and the Rothschild vehicle RIT Capital Partners, have subscribed to a £600m bond which will be exchanged for an equity stake of up to 49% when the new "Williams & Glyn's" bank comes to the market.

Standard Life Investments is still in discussions about joining the consortium.

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RBS itself, however, is putting up almost half of the cash for the deal, in a "secured financing package" of £270m.

Corsair vice-chairman Lord Mervyn Davies, the former Standard Chartered chief and Labour minister, said the IPO was unlikely before 2016, while the rebranding of the bank would happen "in advance of that".

He said the Church Commissioners were "a material contributor and a significant part of the consortium".

New chief executive John Maltby, former Lloyds commercial banking chief who previously headed the controversial Kensington Mortgages, said the commissioners had "fully bought into the strategy and the proposition" of traditional, community-based banking aimed at restoring faith in banks.

Asked whether there would be ethical screening of the bank's investments, he said: "We are developing that.... we will be doing things appropriate to the brand."

The revived Williams & Glyn's brand, which dates back 250 years but has been dormant for nearly 30, will cover the 308 RBS branches in England and Wales, with a particular strength in north-west England, and the six NatWest branches in Scotland.

RBS was required as a condition of its state bail-out to divest the 314 branches, which serve nearly 1.7 million customers, and currently employ around 4500.

The consortium said that would rise to 6000 in the future, but Mr Maltby was unable to say how long that might take. He pointed out that it had room to grow, was unconstrained by legacy issues of mis-selling and bad debts, and its £19.7billion loan book was exceeded by £22.2bn in customer deposits.

The bond will convert into Williams & Glyn's shares subject to a minimum ownership level and with the option to buy a further 10% up to 49%.

Mr Maltby said the new bank had already been partially separated from RBS, though not from its IT platform or branding, and he would be taking over the existing strong team. He said its market shares were 5% in SME lending and 2% in personal customers and the Office of Fair Trading had concluded that it would be a "strong contributor to competition".

RBS chairman Sir Philip Hampton said he was delighted to be working in partnership with the investors, and went on: " Williams & Glyn's will play an important role in the UK banking landscape and will be an excellent new addition to the market, with a particular strength in small business banking, a sector that is so crucial to the UK's economic recovery. Much has been done already in building the standalone business, and today's announcement provides more certainty for our customers and employees ahead of a flotation."

Bruce Van Saun, finance director, said it had been a very competitive process, with several highly credible bidders.