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Williams & Glyn plan is ditched

RBS agrees deal to settle state aid obligations

Ross McEwan: progress

Royal Bank of Scotland has agreed an alternative package with Treasury and European Commission officials that will settle its state aid obligations.

Under the plan the bank will no longer be required to sell assets to a newly-created bank under the Williams & Glyn brand which was one of the original conditions of accepting a bail-out from the government in 2008.

Agreement in principle with the Treasury and the EC Commissioner responsible for competition means it will instead promote competition for banking services to smaller firms. 

There will be a £425m Capability and Innovation Fund, to be administered by an independent body, that will grant funding to a range of competitors in the UK banking and financial technology sectors; and

An Incentivised Switching Scheme will provide £275m of funding for eligible challenger banks for attract SME customers.  An additional £75m will be made available by RBS to cover customers’ costs of switching.

If agreed by the EC’s College of Commissioners it will relieve RBS of its remaining state aid commitments.

It is expected to come into effect later this year and will mean RBS will no longer be obliged to achieve separation and divestment of the Williams & Glyn business by 31 December. 

A £750m provision was recognised in RBS’s 2016 annual results in relation to the previously proposed package of measures. 

An extra charge of £50m in relation to the revised package and its implementation costs will be recorded in the interim results which will be announced 4th August, taking the total provision to £800m.

RBS will incur running costs for the duration of the scheme, which are estimated at around £35m and will be substantially incurred before the end of 2019.  Furthermore, under the terms of the revised package, should the uptake within the Incentivised Switching Scheme not be sufficient, RBS could be required to make a further contribution, capped at £50m. 

Ross McEwan, RBS chief executive, said: “We welcome the progress that HMT [Her Majesty’s Treasury] and the EC Commissioner responsible for competition have made on agreeing an alternative package of remedies to increase competition in the SME marketplace.

“We await a formal decision on this proposal which would allow us to resolve our final state aid divestment obligation.”

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