Royal Bank of Scotland is to be 70.3% owned by the UK taxpayer after investors shunned its share offering.
The bank said only 0.7% of those shares on offer were taken up, meaning the British government will pick up those left over.
RBS's move further into state ownership was widely predicted since the Treasury agreed to replace its £5 billion sterling of preference shares, taken as part of the initial £20 billion rescue last year, with new ordinary shares.
Existing investors were expected to steer clear of the deal as the bank's shares have consistently traded beneath the 31.75p offer price since January.
RBS shares slumped on the day the Government announced the share swap after the bank warned of huge losses. Shares were down around 6% today.
RBS chose to replace the UK government's preference shares because they carried a fee. It is hoped that removing the annual £600m cost of preference share dividends will help bolster the group's cashflow and enable the bank to lend more.
Under the new scheme RBS will be required to increase lending across its UK businesses by £6 billion, extending the lending commitment it gave in October in respect of UK mortgage and corporate customers.
The firm posted the biggest UK loss in corporate history earlier this year - £24.1 billion - caused by bad debt charges of £7 billion and a £16.2 billion writedown on its disastrous acquisition of Dutch bank ABN Amro in 2007 and its US operations.
Furious RBS investors overwhelmingly voted against its remuneration report last week following controversy over former chief executive Sir Fred Goodwin's £700,000 a year pension. The 70% taxpayer share was formally confirmed at another shareholder meeting on the same day.
It is possible the government's economic interest in RBS may rise as high as 95% after a deal to dump more than £300 billion in toxic assets into a taxpayer-backed insurance scheme.
