£750m ‘alternative to RBS Williams & Glyn sale’

Royal Bank of Scotland said EU competition officials are considering an alternative plan that would replace the requirement for RBS to sell about 300 of its branches under a revived Williams & Glyn brand by December 31, 2017.

RBS had been ordered to divest the roughly 300 branches by the end of 2017 as a condition of European Commission rules for receiving a £45 billion UK government bailout during the financial crisis.

The UK Treasury said the alternative plan, if approved, “would help RBS resolve one of its most significant legacy issues which has held back the sale of the taxpayers’ stake.”

The UK taxpayer still owns 72% of RBS.

The new proposal calls on RBS to spend £750 million on alternative measures to encourage competition in UK business banking.

The Treasury said it put forward the plan to EU, and the proposal 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,” said the Treasury.

“The commissioner responsible for EU competition policy, Margrethe Vestager, plans to propose to the College of Commissioners in the coming weeks to open proceedings in order to gather evidence on the new plan.”

RBS said none of the proposals it has received to acquire the Williams & Glyn branch network would deliver a full separation and divestment before the December 31 deadline.

The new plan, if approved, envisages RBS delivering a revised package of remedies to promote competition in the market for banking services to small and medium enterprises (SMEs) in the UK.

The package would include:

  • 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
  • RBS granting business customers of eligible challenger banks access to its branch network for cash and cheque handling
  • An independent fund to invest in fintech to support the business banking of the future

RBS CEO Ross McEwan said: “Today’s proposal would provide a path to increased competition in the SME market place.

“If agreed it would deliver an outcome on our EC state aid divestment obligations more quickly and with more certainty than undertaking a difficult and complex sale and would provide much needed certainty for customers and staff.”

RBS said it had taken a £750 million provision in its 2016 annual results as a consequence of the new proposal.

“This represents our best estimate of the cost of the above package of remedies at this juncture,” said RBS.

RBS will publish its annual results on February 24.