By Margot Patrick 

LONDON--The U.K. government will start selling shares in Royal Bank of Scotland Group PLC within months in a long-anticipated but highly-symbolic move to show the country has moved on from the financial crisis.

Chancellor George Osborne in his annual Mansion House speech on Wednesday said that starting to sell RBS shares, even at a loss, "is the right thing to do" for taxpayers and the economy and that the Bank of England and independent adviser Rothschild have blessed the plan.

The British government stake is worth 32.1 billion pounds ($49.2 billion).

"From bailing out the banks to bringing them back from the brink, now is the time for RBS to rebuild itself as a commercial bank no longer reliant on the state, but serving the working people of Britain," Mr. Osborne said in prepared statements for the speech.

The government spent GBP45.5 billion to bail out RBS in the financial crisis, after a disastrous acquisition of Dutch banking group ABN Amro nearly caused the bank to collapse. The emergency funds have sat at the bank for nearly seven years, as a prolonged recession, an onslaught of regulatory fines and political squabbles over the bank's strategy held back its recovery.

Mr. Osborne said he had sought guidance on the RBS share sale plan from Bank of England Governor Mark Carney, who in a letter on Wednesday agreed the plan should go ahead now to "promote financial stability, a more competitive banking sector and the interests of the wider economy."

There had been anticipation in recent months that the government was preparing to start selling the shares. In March, Mr. Osborne said he wanted to get moving on the privatization in the summer, following the country's general election last month that returned the Conservative Party to power.

Selling the shares will underline the government's view that an economic recovery has taken hold in Britain and that its banking system has been significantly strengthened. The U.K. was hit harder than most countries in the crisis of 2008 and 2009 because of the bank bailouts and its reliance on financial services for economic growth.

The first shares sold by the government in RBS will almost certainly be at a loss. The stock closed on Wednesday at GBP3.55, well below the average price of GBP5 a share paid in the bailout by the former Labour government. But Mr. Osborne said it is right to start now and increase the bank's free float, paving the way for larger sales later. He said selling the entire stake could take years, while signalling a retail offer to the general public is likely to be part of the plan.

In his prepared speech on Wednesday, Mr. Osborne said the longer the government waited to sell the shares, "the higher price the whole economy will pay." He said the government will make sure that taxpayers get back "billions more than they were forced to put in" to the country's banks.

The pledge was supported by a review by Rothschild that said the government should expect to make around a GBP14 billion profit on its bank bailouts. The government has already made money from selling much of its stake in Lloyds Banking Group PLC, the other major bank it bailed out in the crisis.

Returning RBS to shareholders has taken far longer than the government or analysts had foreseen. The chief executive installed in 2008 to carry out a drastic restructuring, Stephen Hester, was forced out in 2013 after clashes with government officials over the bank's strategy.

Mr. Hester's successor, Ross McEwan, has taken a sharper ax to RBS's investment bank and overseas units and carried out the government's wish to reshape the bank to focus on British households and companies.

After the worst of the financial crisis had passed, Britain underwent a round of soul-searching about the purpose of banks and the activities they should carry out. Several reviews by government officials and outside groups led to major banking reforms in 2012, and banks soon will be forced to start separating their retail and investment banks.

There were also repercussions from the RBS bailout for the country's financial regulator, which had allowed RBS to buy ABN Amro despite a perilously thin capital cushion. It was disbanded in 2013 to create two new agencies and its bank supervision powers were passed to the Bank of England.

The former RBS CEO who had overseen the ABN Amro purchase, Fred Goodwin, was stripped of his knighthood three years ago.

The chancellor's plan to sell RBS was unveiled alongside results of a yearlong review into financial-market rules and practices led by the Bank of England.

The review recommended lengthier jail terms for traders found guilty of market manipulation and called for senior executives at financial firms to face fines and other civil penalties if their staff break the rules.

Jason Douglas contributed to this article.

Write to Margot Patrick at margot.patrick@wsj.com

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