The implementation of the proposed overhaul of the UK banking sector could reduce the value of the government's holdings in Royal Bank of Scotland and Lloyds Banking Group by between £6bn to £9bn, a government report said on Thursday.

The estimates were included in regulatory proposals that could see lenders forced to implement rules aimed at "ring-fencing" retail-banking operations by 2019. Following a series of taxpayer funded bailouts the UK government owns 40% of Lloyds and 82% of RBS. RBS and Lloyds declined to comment on the estimates.