British finance minister George Osborne will launch the early sale to the public of shares in bailed-out lender Lloyds Banking Group, the Sunday Times reported without citing sources.

Shares the government owns in Royal Bank of Scotland , also rescued during the financial crisis, will be sold at a later date, the paper said.

Osborne will announce the sale of the state's 39 percent stake in Lloyds, which could raise up to 17 billion pounds ($26 billion), during his annual policy speech to London's business community at Mansion House on June 19, the paper said.

The Treasury declined to comment on Sunday, and Lloyds said it was a matter for the government.

Osborne is under pressure over a widely unpopular austerity programme aimed at cutting Britain's huge public deficit.

Offloading shares in Lloyds could be relatively straightforward, given they are trading above the price at which the government considers it would break even on the transaction.

A report by thinktank the Policy Exchange, due to be published on Monday, will support selling Lloyds shares, but via a different structure. It will recommend taxpayers are given shares, keeping any profits but with the original cost returned to the government when they sell them, sources familiar with the report said.

Any decision on both banks' future will also likely be influenced by a report from the Parliamentary Commission on Banking Standards, expected to be published next week.

For RBS, the commission will put forward as one option dividing the lender into a 'good' and a 'bad' bank as a way of ring-fencing its toxic assets, political and industry sources said on Tuesday.

RBS has already undergone one massive restructuring since the government pumped in 45.8 billion pounds ($70 billion) in 2008 to keep it afloat, leaving taxpayers with an 81 percent stake.

UK Financial Investments, which manages the government's bank stakes, could not immediately be reached for comment. – Reuters