An RBS spokeswoman referred on Wednesday to disclosures alongside the bank's half-year results earlier this month. These stated that RBS had initiated talks with U.S. and UK authorities on whether it complied with economic sanctions on Iran, and that it could face a material impact from the investigation.

The inquiry raises the possibility of a hefty fine for the part-nationalized British bank, which is also being investigated for its involvement in the Libor rate rigging scandal, and will raise the pressure on Chief Executive Stephen Hester.

Also on Wednesday, Germany's Die Zeit newspaper reported that Commerzbank (CBKG.DE) expects it may face "considerably negative" consequences from a U.S. investigation into Iran sanctions violations. Citing a Commerzbank securities filing, it said this could include a financial hit that exceeds provisions.

Commerzbank said it had not done business with Iran since 2007 and declined further comment.

In the disclosures accompanying the RBS half year results on August 3, the British bank said it had "initiated discussions with UK and U.S. authorities to discuss its historical compliance with applicable laws and regulations, including U.S. economic sanctions regulations".

These followed an internal review begun by Hester shortly after his arrival at the bank in 2008.

"The investigation costs, remediation required or liability incurred could have a material adverse effect on the group's net assets, operating results or cash flows in a particular period," the bank said. RBS had been making similar disclosures for the past 18 months, the spokeswoman said.

The Financial Times reported on Wednesday that the U.S. Federal Reserve and Department of Justice were conducting the investigation, citing several people close to the situation. It cited a person familiar with the situation as saying one risk manager had already left the bank following the internal review.

RBS, which is 82 percent-owned by the taxpayer, declined further comment.

A spokesman for the Federal Reserve said it could not "comment on supervisory matters pertaining to individual institutions". A representative at the Justice Department did not respond to a request for comment.

Standard Chartered last week agreed to pay $340 million to the New York bank regulator over transactions linked to Iran. The British bank had been accused by the New York Department of Financial Services of concealing $250 billion in Iranian transactions.

In 2010, RBS agreed to pay $500 million to settle similar allegations by U.S. federal authorities that ABN Amro, a Dutch bank RBS acquired in 2007, had violated U.S. sanction laws.

Analysts expect RBS to settle with U.S. and UK regulators over its involvement in the Libor scandal later this year. It has also endured problems on the domestic front, with a computer systems failure causing massive disruption to customers in June.

Shares in RBS were down 0.6 percent to 236 pence at 0905GMT.

(Reporting by Matt Scuffham in London and Nate Raymond in New York; additional reporting by Rachelle Younglai and Aruna Viswanatha; Editing by Phil Berlowitz and David Stamp)

• A Permanent Economic Emergency