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Nationwide receives £50m to launch business banking

Nationwide receives £50m to launch business banking

Nationwide has been awarded £50m to enter the business banking market as part of a scheme to increase competition in this area.

The building society, which is currently the only major high street provider not to offer a business current account, was awarded the money as part of a £775m fund provided by Royal Bank of Scotland as a condition of its bailout by the UK government during the financial crisis.

As part of its £45bn 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 which includes this package of measures to increase competition in the business banking market.

As well as Nationwide, Investec and the Co-operative Bank have been awarded £15m each.

Joe Garner, chief executive of Nationwide, said: "This is good news for small businesses. The fund gives unprecedented opportunity to accelerate plans and inject competition into this market. As a building society, we are in a unique position as the only mutual with the scale, trust and track record to offer a compelling alternative to the banks.

"While the money is a massive boost for our plan, we also aim to match every pound of the £50m award with our own funding over a five-year plan. As a mutual organisation driven by our social purpose, it is important that business owners are given more choice to find an account which suits their needs and we look forward to delivering this proposition."

Investec has said the award will allow it to accelerate the development of its business division, which will include deposits and lending.

As part of the award, Investec has committed to providing £300m of additional lending to UK SMEs and providing a range of online tools.

Chris Meyer, head of Investec UK Corporate and Investment Banking, said: "We are delighted to receive support from the Capability and Investment Fund, which recognises the exciting vision Investec has for creating more competition in the UK business banking market and ensuring that SMEs have access to first-rate banking services."

In February, Metro Bank, Starling and Clearbank received funding from the fund to invest in small business banking.

As a condition of its bail-out, the EU imposed five major divestments on RBS, of which four have been implemented but the bank said the fifth - the sale of Williams & Glyn - could not be completed in time.

Talks with both Santander and Clydesdale & Yorkshire Banking Group did not progress towards a deal and instead the EU agreed to allow RBS to provide funding to its competitors.