Big winner: Metro Bank will receive £120m (pic: Terry Murden)
Metro Bank, Starling and ClearBank are the first round winners of a £775 million fund set up for lending to SMEs by Royal Bank of Scotland under an agreement with the EU.
RBS is freeing up the pot as a revised condition of its £45bn 2008 UK government bailout in 2008. The Business Banking Switch scheme launches on Monday 25.
The pot is made up of £350m available to incentivise switching and another £425m to boost business banking deals. Banking Competition Remedies (BCR) has been set up to oversee the giveaway.
The first grants awarded by BCR relate to what it terms the Capability and Innovation Fund are to Metro Bank (£120m), Starling (£100m) and ClearBank (£60m).
Godfrey Cromwell BCR’s Chairman says: “These awards seek to increase competition in the business banking market. Following the successful launch of the Incentivised Switching Scheme by BCR last year, Pool A is the first group of grants from the Capability and Innovation Fund.
“Further grants (Pools B, C and D) will be awarded later this year.”
BCR received a total of 16 applications from six applicants for the initial pool A process. Eight other challenger lender remain in the mix for subsequent BCR grants.
They include TSB, Clydesdale, Coop Bank, Nationwide, Handelsbanken, Monzo, Arbuthnot and Hampden & Co.
The deal was agreed with the EU following the failure of RBS to parcel up a group of branches to be relaunched as a new bank under the revived Williams & Glyn brand.
The new scheme will see money distributed to rival banks in an attempt to stimulate more lending to SMEs, although bank switching is notoriously low. Less than 1% of the UK’s six million SMEs switched their primary business current account last year.