Royal Bank of Scotland chairman Howard Davies said a British vote to leave the European Union would risk cutting the state-owned lender off from its Irish Ulster Bank division.

“We would be very concerned if we were detached from that bank,” Mr Davies, 65, said on Wednesday.

With Ulster Bank headquartered in Dublin, RBS is considering "what it might mean if we were out whilst owning a bank within the euro zone" as part of its contingency planning, he said, ahead of Britain's June 23rd referendum on its EU membership.

While some global banks with operations in London have said they may move employees in the event of a so-called Brexit, RBS's Irish business presents Mr Davies and chief executive officer Ross McEwan with additional complexity.

Ulster Bank is the third-largest lender in the Republic of Ireland and Taoiseach Enda Kenny has warned that a UK departure from the EU would present a “major strategic risk” for Ireland.

“There is an issue with our Irish bank we have to be careful about,” Mr Davies said. “There would be an issue with corporate lending into Europe. Could we do that out of a non-EU entity or would we have to have an entity? It’s practical issues like that which would affect us.”

RBS last year scrapped plans to sell Ulster Bank after injecting £15.3 billion into the company during the financial crisis sparked by the country’s property collapse. The lender split the unit into separate divisions for the Republic and the North, with the UK part of the business reporting into the wider banking group. RBS hired Danske Bank executive Gerry Mallon in November to run the operation in the Republic from June.

- Bloomberg