Monday’s decision follows the agreement in principle reached on July 26 between Commissioner Margrethe Vestager and the UK Government.

In April 2017, the Commission opened an in-depth investigation to assess whether the alternative package proposed by the UK authorities could be considered an appropriate replacement for the original commitment to divest part of its UK retail and SME banking operations known as Williams & Glyn.

This commitment to divest Williams & Glyn was made by the UK authorities as part of RBS’s restructuring plan submitted in 2009 and amended in 2014 to remedy competition concerns in the concentrated UK SME banking sector, where RBS is the leading bank.

“The Commission can only accept modifications to existing commitments by Member States and aided banks that were given to obtain approval for restructuring aid (such as the one leading to the existing RBS restructuring decision), if the new commitments can be considered equivalent to those originally provided … ” said the Commission.

” … the package targets a transfer of a 3% market share in the UK SME banking market from RBS to challenger banks.

“The Commission’s investigation concluded that the improved package is sufficient to replace the divestment commitment and will increase competition in the UK SME banking market.”

The revised “Alternative Remedies Package” is focused on two plans to promote competition in the market for banking services to SMEs in the UK:

• A £425 million Capability and Innovation Fund that will grant funding to a range of competitors in the UK banking and financial technology sectors
• A £350 million Incentivised Switching Scheme which will provide funding for eligible challenger bodies to help them incentivise SME customers of the business previously described as Williams & Glyn to switch their accounts and loans from RBS paid in the form of “dowries” to the receiving bank. In addition, under the terms of the Alternative Remedies Package, should the uptake within the Incentivised Switching Scheme not be sufficient, RBS may be required to make a further contribution, capped at £50 million.

Ross McEwan, RBS CEO, said: “We are pleased that we now have final approval from the European Commission for the Alternative Remedies Package.

“This allows us to resolve our final state aid divestment obligation and brings welcome clarity for our customers and staff.

“It also builds on the progress we have made already this year in resolving our major legacy issues through reaching a settlement with the Federal Housing Finance Agency, and resolving the 2008 Rights Issue litigation.

“We remain committed to resolving our last remaining major legacy issue, the investigation into our historic US RMBS activities.”   

RBS said an independent body will be established to administer the Alternative Remedies Package.

RBS will make an upfront contribution of £20 million to cover certain operational expenses of the independent body relating to the Alternative Remedies Package. 

RBS added: “… the Alternative Remedies Package remains consistent with the £800 million provision that RBS took in relation to the expected costs of the package in H2 2016 and H1 2017.”