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EC expected to approve new conditions

RBS poised to abandon sale of Williams & Glyn

RBS St Andrew SqRoyal Bank of Scotland has been told it may no longer be required to sell Williams & Glyn and will instead face a revised set of conditions imposed by European regulators.

The bank announced in October that none of the proposals to acquire the business repackaged under the revived Williams & Glyn brand could be completed before this year’s deadline.

EC officials are now expected to release RBS from its bail-out obligations by promoting a package of measures to support small and medium sized enterprises (SMEs).

If a revised deal is accepted the Williams & Glyn business  will be “reincorporated” into RBS, effectively reversing the work done so far to split off the business. This is likely to create “some additional restructuring charges during 2017 and 2018”, said RBS in a statement.

RBS had been ordered by the EC to sell 300 branches, mainly NatWest outlets in England, as a condition for receiving taxpayer funds to shore up its balance sheet in 2008.

Clydesdale Bank owner CYBG and Santander – on two occasions – were unable to reach agreement to buy the business.

In a statement issued after the stock market closed, RBS said the Commissioner responsible for EU competition policy has told the UK Treasury that the revised conditions would “replace the existing requirement to achieve separation and divestment by 31 December 2017 of the business previously described as Williams & Glyn.”  

RBS would be expected to deliver a package of measures to promote competition in the market for banking services to SMEs, including:

– 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 eligible challenger banks;

– RBS granting business customers of eligible challenger banks access to its branch network for cash and cheque handling, to support the measures above; and

– An independent fund to invest in fintech to support the business banking of the future.

RBS as already spent £1.8bn attempting to offload the Williams & Glyn business and despite several assurances that everything was on track it was failed to sell it or float it on the stock market.

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 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 has taken a £750 million provision within its 2016 annual results as a consequence of today’s proposal. This represents the bank’s “best estimate” of the cost of the above package of remedies at this stage.

RBS will be publishing its 2016 annual results next Friday and is expected to announce a ninth consecutive loss.

 

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