Royal Bank of Scotland Group Plc’s credit rating was put on review for downgrade by Moody’s Investors Service, which cited the government’s decision to consider a break-up of the bailed-out British lender.

Moody’s put Royal Bank of Scotland Group’s long-term ratings and Royal Bank of Scotland Plc’s A3 long-term debt and deposit ratings on review, according to a statement today.

Chancellor of the Exchequer George Osborne hired Rothschild this week to assess the case for breaking up RBS and hiving off its toxic assets into a so-called bad bank. The Treasury is struggling to cut its 81 percent stake in the lender, with the shares trading for less than the price the government paid for them when it provided the costliest bank bailout in history. Stephen Hester quit last month as RBS’s chief executive officer.

“It’s not surprising given the uncertainty surrounding the future of RBS,” said Simon Maughan, a banking analyst at Olivetree Securities Ltd. in London. “There are big issues about who is going to run RBS, whether it’s going to be allowed to have an investment bank, and what impact that is going to have on profitability.”

RBS fell 2.6 percent to 276.70 pence in London trading today, extending its decline this year to almost 15 percent. Edinburgh-based RBS is the worst-performing British bank stock this year.

‘Further Uncertainty’

“Moody’s action reflects the further uncertainty for bondholders resulting from the U.K. government’s recent announcement that it is examining the merit of a possible breakup of RBS and how this could be achieved,” the ratings company said. “Some of these options may entail losses for creditors.”

Splitting the bank could increase the risk of losses especially for junior bondholders, as assets are sold. A smaller bank would also be less profitable, Moody’s said.

The ratings company said it expects to complete its review after the government decides what to do with RBS, a decision slated for the autumn.

Barclays Plc, Britain’s third-largest bank by market value, Deutsche Bank AG and Credit Suisse Group AG had their credit ratings lowered this week by Standard & Poor’s as new rules and “uncertain market conditions” threaten their business.