Slaughter and May has stood down from the Royal Bank of Scotland's (RBS) legal panel in the wake of discussions regarding risk management, it has emerged.

Slaughters has indicated that the decision was taken earlier this year after discussions regarding RBS' broad prohibition on panel advisers limiting liability on individual transactions. It is understood that there was particular concern over the ban on limiting risk on work that could carry liabilities to third parties, such as vendor due diligence reports.

Capping liability on individual transactions has become relatively widespread in recent years as City law firms have implemented stronger policies to manage their risk, following similar initiatives from leading accountancy firms. Such agreements cap liabilities in the event of a negligence claim, often in the region of £5m to £25m.

RBS general counsel Chris Campbell declined to comment on the bank's relationship with individual firms. However, he stressed that RBS' policy was not to allow its advisers to limit liability on individual transactions and that this policy has not changed in recent years.

The move comes amid increasingly robust efforts from major banks to enforce strict standards from advisers in terms of pricing and meeting panel terms. Banks in particular have been resistant to law firms limiting risks on individual mandates even with third-party liabilities.

One partner at a rival City firm commented: "I would be surprised if the liability caps were the only reason for the split – unlimited liability for preferred clients is common practice and has been for a long time."

RBS is one of the most influential clients in the UK and instructs firms including Allen & Overy, Linklaters and Freshfields Bruckhaus Deringer.