The Royal Bank of Scotland (RBS) announced today that it plans to curtail its investment banking arm, cutting 3,500 jobs over the next three years.

The bank, which is 83 per cent owned by the taxpayer, plans to close the unprofitable parts of its global banking and markets business, in response to what it termed the ‘changed market and regulatory environment’.

This likely refers to the ongoing pressures brought on by the Eurozone crisis and the pressure from the Government to separate ‘risky’ investment banking from retail operations.

Shares in RBS were comfortably the highest riser on the FTSE 100 this morning as investors reacted positively to the news, currently up 8.17 per cent at 23.57p.

RBS chief executive Stephen Hester commented, ‘It is clear that, particularly in the wholesale banking arena, significant new pressures have emerged.

‘The changes we are announcing today seek to ensure that RBS is at the front of the pack in pursuing a strategy that reflects the environment we expect to operate in.

‘Our goal from these changes is to be more focused for customers, more conservatively funded, more efficient and with better, more stable returns for shareholders overall.’

The move, outlined in 2011, will restructure the firm’s wholesale banking operations into ‘Markets’ and ‘International Banking’ to concentrate on fixed income, foreign exchange, debt financing, transactions services and risk management solutions.

The bank plans to offload its cash equities, corporate broking, equity capital markets, and mergers and acquisitions businesses, revealing it was talking to potential buyers but that no deal had been made.

Broker Oriel Securities praised the move as a ‘sensible’ way for RBS to prune its balance sheet and maintained its ‘buy’ recommendation.