The European Commission will consider plans to amend Royal Bank of Scotland’s state aid obligations, rendering the sale of Williams & Glyn no longer necessary.
RBS has said the requirement to sell the small-business lender could not now be met by the deadline of December 2017, imposed by the European Union.
Talks with both Santander and Clydesdale & Yorkshire Banking Group have not progressed towards a deal.
Instead the bank, together with HM Treasury, has proposed a package of measures worth around £750m to increase competition in the business banking market.
The commissioner responsible for EU competition policy will now propose the arrangement to the College of Commissioners before gathering evidence on whether the plans will meet their state aid requirements.
Ross McEwan, RBS chief executive, 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 European Commission 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.”
As part of its £45bn government bail-out in 2009, the European Union imposed a number of requirements on RBS to prevent it from having an unfair advantage in the market based on state aid.
These included five major divestments, of which four have been implemented with the Williams & Glyn deal still to complete.
In order to get around this RBS and the Treasury have proposed a fund, administered by an independent body, which eligible challenger banks can access to increase their business banking capabilities.
There will also be funding for eligible challenger banks to help them incentivise SMEs to switch from RBS.
RBS will also allow business customers of eligible challenger banks to access its branch network for cash and cheque handling.
An independent fund to invest in fintech to support business banking has also been proposed.
A HM 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.”
More details, including precise eligibility criteria for challenger banks, will be announced “in due course”.
damian.fantato@ft.com
