Clydesdale and Yorkshire Bank will be floated in London by their Australian owner by the end of the year, it has emerged.
National Australia Bank said up to 80% of shares in the two banks would be given to its shareholders and the remainder sold to institutional investors via a float by the end of 2015, subject to market conditions.
NAB also announced a A$5.5 billion (£2.9 billion) cash call to pave the way for the listing and strengthen its balance sheet.
The Prudential Regulation Authority has ruled that NAB will have to provide up to £1.7 billion in capital for the separated bank to cover potential blows on mis-sold payment protection insurance and interest rate hedging products not covered by existing provisions.
Shareholders have begged NAB to dump its UK banking business for years, with loan losses hammering profits on several occasions since 2008.
The demerger comes after efforts to sell the business flopped and will leave NAB focused on its Australian and New Zealand banking operations.
Clydesdale has 294 branches and 659,000 online customers. But last month it was fined a record £20.7 million by the Financial Conduct Authority for abuses in handling payment protection insurance claims which went as far as misleading the Financial Ombudsman.
