The Government has proposed a radical new plan that would see RBS
fund and deliver a series of initiatives, worth around £750
million, to boost competition in today’s UK business banking
market.
The proposal, put forward by HM Treasury with the agreement of
RBS, has been designed to help small and medium sized enterprises
(SMEs) access and benefit from greater choice in the banking
services available to them.
As part of the State aid commitments agreed with the European
Commission in 2009 and updated in 2014, RBS undertook to carry
out five major divestments. Four have been successfully
implemented. In line with its commitments, HM Treasury and RBS
have put significant effort into achieving the fifth divestment,
that of Williams and Glyn, which has to-date been unsuccessful
mainly due to external factors.
If adopted, this new plan would replace the need for the fifth
divestment and would finally remedy the distortion in the UK’s
business banking market which flowed from the provision of state
support, with greater speed and certainty than a divestment.
HM Treasury has been in constructive contact with the European
Commission in recent months and HM Treasury will now seek formal
amendment to RBS’s State aid commitments. The Commissioner
responsible for EU competition policy, , plans to propose to
the College of Commissioners in the coming weeks to open
proceedings in order to gather evidence on the new plan. HM
Treasury will carry out a market testing exercise in parallel.
The opening of proceedings does not prejudge the outcome of the
investigation.
The proposed package of measures includes:
· a fund, administered by an independent body, that eligible
challenger banks can access to increase their business banking
capabilities;
· funding for eligible challenger banks to help them incentivise
SMEs to switch their accounts from RBS paid in the form of
“dowries” to challenger banks to use to incentivise
switching;
· RBS granting business customers of eligible challenger banks
access to its branch network for cash and cheque handling, to
support the measures above; and
· an independent fund to invest in fintech to support the
business banking of the future.
A Treasury spokesperson said:
“RBS must deliver on its remaining State aid commitments and this
new plan represents the most effective way of delivering the
pro-competition objectives behind them.
“This new plan provides a clear blueprint to increase competition
in the UK’s business banking market, and would help RBS resolve
one of its most significant legacy issues which has held back the
sale of the taxpayers’ stake.”
The estimated upfront cost of the proposed package to RBS is
expected to be in the region of £750m.
In keeping with the original commitments, the other large
incumbent banks (HSBC, Lloyds, and Barclays) would not be
eligible to benefit from the proposal. Further details, including
precise eligibility criteria for challenger banks, will be
announced in due course.
