The Royal Bank of Scotland Group  

RBS makes £835m state aid deal after branch sale axed

RBS makes £835m state aid deal after branch sale axed

Royal Bank of Scotland has reached an agreement that will see it commit £835m to new lending instead of selling off part of its branch network as planned.

The deal satisfies a state aid penalty relating to its 2008 bailout.

Originally it had been agreed between the European Union and the Treasury that RBS would either float or sell its 300 branches making up the Williams & Glynn brand.

Article continues after advert

But this requirement was dropped after it was decided to be too difficult and could negatively impact customers.

The £835m deal announced today (27 July) is the alternative.

It will see RBS fund and deliver a package of measures designed to boost competition and help small and medium sized enterprises (SMEs) benefit from greater choice and offers on banking services.

This includes a £425m Capability & Innovation Fund, administered by an independent body, comprised of 15 grants that eligible challenger banks and other financial services providers can compete for to increase their business banking capabilities. 

These awards will range from £5m to £120m.

 Also, there will be £350m of funding to incentivise SMEs to switch their accounts from the business previously described as Williams & Glyn to eligible challengers.

It will be comprised of £225m paid in the form of “dowries” to challengers to use to incentivise SMEs to switch their business current accounts, £50m to facilitate the switching of related loans, and £75m set aside by RBS to cover customers’ switching costs.  

This fund is intended to facilitate the switching of 120,000 SMEs and, according to a statement from the Treasury, includes safeguards to maximise the likelihood of achieving this target, including the possibility of extending the scheme outside the Williams & Glyn customer base in certain circumstances.

RBS will also fund around £60m of additional implementation and other costs.

The Economic Secretary to the Treasury, Stephen Barclay, said:“The announcement today will help boost competition in the business banking market and marks another significant milestone in resolving a major legacy issue at RBS.

“It builds on the recent settlement with the Federal Housing Finance Agency and together they show the progress being made to resolve RBS’s outstanding issues.”

RBS remains more than 70 per cent owned by the taxpayer.