Royal Bank of Scotland (RBS) announced details of a major reorganization of its corporate structure on Friday as it prepares for the implementation of a mild-mannered U.K. version of the Glass-Steagall Act.

The proposed structure unveiled on Friday puts the overwhelming majority of assets in the "ring-fenced" entity, which new rules stipulate must house a bank's safer operations. But perversely - assuming regulators agree to RBS' proposal - it means the funding situation for its investment banking operations may not be as dire as feared.

The Banking Reform Act of 2013 requires all U.K banks with deposits of more than £25 billion ($33.2 billion) prize their investment banking operations away from their retail banking arms from January 2019.  It also means that both retail and investment banks will have their own individual regulatory capital requirements. (They still maintain ownership of both sets of assets).

If given the nod, the RBS investment bank will be rebranded as Natwest Markets plc and will also house the group's international businesses that are outside Western Europe. According to earlier estimates from Moody's, this kind of arrangement would leave the investment bank holding around 20% of the group's risk-weighted-assets.

The ring-fenced bank will be named Royal Bank of Scotland plc and will incorporate all personal, private and business banking in Western Europe.

RBS has also exercised the option available within the rules to transfer some of its corporate banking into the ring-fenced division, which will then account for around 80% of the group's risk-weighted assets.  

"The future ring-fenced structure of the bank is not only designed to be in compliance with the new regulatory requirements and objectives but will better reflect who we are as a bank and what we stand for: a bank that is focused on its customers," said CEO Ross McEwan.

Despite the noble intentions behind a separation of investment from retail banking, the rules have led to concerns over how the investment bank at RBS will fund itself without the full backing of the retail bank.

In early September, the Financial Times that it has been diverting £70 billion per year from its retail arm in order to fund the corporate and investment banking activities of the group. It also said that the non-ring-fenced RBS (Natwest Markets) might need to seek a more costly replacement of the £70 billion in time for January 2019.

But the legislation does not place an outright ban on ring-fenced entities making loans to their non-ring fenced sister organizations, according to Moody's.

"RFBs' [ring fenced banks'] exposure to any other third party (including NRFBs within the same group) will be limited to 25% of their regulatory capital," the ratings agency said.

With RBS' risk-weighted assets most recently worth £245 billion, if 80% went into the ring-fenced business that could potentially free that unit to extend just under  £50 billion in loans to the investment banking operation.

RBS stock was up by 0.6%, to 177.8 pence, during mid-afternoon trading in London. It had previously fallen by more than 1%, in line with a wide selloff in the European banking sector.