Royal Bank of Scotland (RBS) is in talks to settle one of the two major US investigations into allegations it mis-sold mortgage-backed securities it needs to overcome before the British government can sell its shares in the bailed-out bank.

Royal Bank of Scotland Group is one of many prospective bidders that have shown an interest in buying Granite, a £13bn (€18.3bn) mortgage securitisation vehicle earmarked for sale by the UK government.

Shares in London closed higher tonight despite falls on European markets because of continuing fears over the eurozone debt crisis.

European markets slumped deep into the red today as renewed fears over the continent’s debt crisis rocked banks across the continent.

Royal Bank of Scotland shares slumped 12% today as litigation fears, weak economic data and the eurozone debt crisis drained market confidence.