The logo bank Coutts is seen at an office building in Zurich.

London - Royal Bank of Scotland's private bank Coutts has set aside 110 million pounds (R1.9 billion) to compensate thousands of customers for unsuitable investment advice, a person familiar with the matter told Reuters on Friday.

RBS said in July that Coutts had decided to examine the suitability of investment advice given to its clients following a review into Britain's wealth management industry by the country's financial regulator.

Coutts, which was founded over 300 years ago and is best known as banker to Queen Elizabeth, is contacting clients and will offer compensation in appropriate cases, RBS has said.

RBS said earlier in August that it was considering selling the international arm of Coutts, in a deal industry sources say could net it as much as $1 billion.

RBS, which is 81-percent owned by the British government following a 45 billion pound rescue during the 2008 financial crisis, is under pressure to focus on lending to UK households and businesses to support Britain's economic recovery.

The bank said in January that it had set aside a further 3 billion pounds to cover the cost of past misdeeds, contributing to an 8.2 billion pound loss last year.

RBS has since reported two consecutive quarters of profits but warned in July that significant conduct and litigation issues would hit its profits in the months and years to come.

The latest setback follows fines for the mis-selling of mortgages to UK customers earlier this week. - Reuters