Clydesdale Bank is expected to unveil plans this week for a significant increase in its dividend increase.

The bank will tell investors in London on Tuesday that an easing of its capital reserves requirements will free up £1 billion on its balance sheet.

It follows an agreement with the Bank of England to give it equal treatment with the larger banks such as RBS and Lloyds which are allowed a tighter cushion than smaller rivals.

Last week Clydesdale emerged as the worst bank for rejecting customers’ applications for PPI.

In the case of Clydesdale Bank 90% of rejections have been overturned by regulators who have criticised all the banks for still getting it wrong.

The Financial Ombudsman Service reversed these decisions.