Royal Bank of Scotland and Santander reckon the official cost estimate of reforms aimed at making further taxpayer bailouts of the banking system unnecessary are too low, according to documents published Thursday by the Lords.

The Independent Commission on Banking's (ICB) estimate that the changes it proposed in September will cost the industry between 4 billion pounds and 7 billion are understated, Santander UK Chief Executive Ana Botin wrote earlier this month in a letter to the Lords' select committee on economic affairs.

Santander's analysis of the likely costs is in line with a 10 billion pound estimate from analysts at Goldman Sachs, Botin said.

In a separate letter, RBS, 83 percent state-owned after receiving an emergency bailout in the 2008 financial crisis, believes the ICB cost estimate is likely to be understated, its Chief Executive Stephen Hester said.

Adapting to the ICB recommendations will likely cost RBS between 500 million pounds and 1 billion, plus annual operating costs of some hundreds of millions of pounds, Hester added.

The ICB, set up to propose ways of preventing a repeat of the 2008 financial crisis, wants banks to ring-fence their retail operations from their riskier investment banking activities, and to hold billions of pounds in extra capital.

(Reporting by Myles Neligan; Editing by David Holmes)