Government body UK Financial Investments is in talks to sell £10bn worth of RBS shares to a consortium of investors led by Sheikh Mansour, the owner of Manchester City Football Club.
Earlier this week sources said talks had been ongoing for some time with a number of parties over the sale of part of the government's stake in RBS.
According to the Financial Times, Abu Dhabi has discussed a £10bn investment into RBS led by Sheikh Mansour, which could kick-start the process of the government's exit from the bank.
Sheikh Mansour, backed by other Abu Dhabi and Middle Eastern investors, is understood to have indicated his interest in buying part of the British government's RBS holding.
Mansour is already well known in England, having snapped up Manchester City two years ago. He has turned the club into a force to be reckoned with in the Premiership.
The Sheikh and his partners could invest up to £5bn in RBS shares - potentially equivalent to a 14% stake in the bank. The remainder would be injected as so-called contingent capital, which could convert from debt to equity on the basis of a pre-agreed trigger.
News of the potential sale has already lifted shares in the bank this week. As the wider market sold-off yesterday, RBS topped the risers list, gaining as much as 7% during the day and closing up 3% at 28.67p, a nine-day high.
Incorporating SM&CR into company culture
'Strong client focus'
Until Woodford suspension ends
Latest news and analysis
Our weekly heads-up for advisers