Royal Bank of Scotland has paved the way to resume dividend payments once its financial health improves.

The bank has negotiated the removal of a barrier to dividend payments, the FT reported. The deal agreed with the Treasury to buy out the so-called dividend access share (DAS) could allow the part-nationalised lender to resume payouts when its finances improve. DAS was a financial agreement that gave the government preferential dividend rights and made it prohibitively expensive for the bank to resume payouts to ordinary investors.

The bank also secured an extension to 2016 to sell Williams & Glyn’s, which was built from the 316 branches it has to dispose of as a condition of its bailout.

RBS is still lossmaking, so dividends could still be some way off as it rebuilds capital.

The bank said it had agreed to buy out the DAS for £1.5 billion which will not all be paid upfront. It will initially pay £320 million to the Treasury, with the remainder paid in flexible instalments to the Treasury. Any unpaid amount will increase 5 per cent per year from 2016.