Royal Bank of Scotland's mission to sell its U.S. banking arm Citizens Financial Group to outside investors just got a major boost.

Even though Citizens Financial Group (CFG) in Providence, R.I., failed the Federal Reserve Board's stress test, the financial institution will be allowed to increase shareholders' dividends during its upcoming public offering.

Federal regulators recently rejected the $122 billion-asset bank's future capital plan to survive an economic downturn. Because it failed the test, Citizens cannot increase dividends above prior year levels.

But since Citizens Financial does not file quarterly earnings report with the Securities and Exchange Commission and its dividends are paid directly to RBS, London's Daily Telegraph reported that restrictions are not enforced to dividends paid to investors participating in the bank's public offering filed on May 12.

RBS is planning to sell about a quarter of its U.S. business by the end of this year. Overall, it is hoping to exit the business entirely in 2016.

The public offering is expected to raise about $100 million, according to a registration form filed with the SEC.

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