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RBS will keep branches after EC formally backs “alternative plan”

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Ross McEwan
Ross McEwan

Royal Bank of Scotland has today announced that it has received formal approval from the European Commission for its £800 million “Alternative Remedies Package” designed to replace its obligation to sell-off its Williams & Glyn business.

First revealed in July, the Alternative Remedies Package forms the basis of a new agreement in relation to RBS’s remaining State Aid commitments following its record-breaking £45 billion taxpayer bailout in 2008.

RBS had previously been required to divest Williams & Glyn by 31 December this year.

But the now formally-approved plan is focused on two remedies to instead promote competition in the market for banking services to small and medium-sized enterprises (SMEs) in the UK.

These are:

  • A £425m Capability and Innovation Fund that will grant funding to a range of competitors in the UK banking and financial technology sectors; and

  • A £350m Incentivised Switching Scheme which will provide funding for eligible challenger bodies to help them incentivise SME customers of the business previously described as Williams & Glyn to switch their accounts and loans from RBS paid in the form of “dowries” to the receiving bank. In addition, under the terms of the Alternative Remedies Package, should the uptake within the Incentivised Switching Scheme not be sufficient, RBS may be required to make a further contribution, capped at £50m.

    • RBS said that an independent body will now be established to administer the Alternative Remedies Package, to which the still 73 per cent state-owned bank will make an upfront contribution of £20m to cover “certain operational expenses”.

    RBS has also agreed to provide separate indemnities - capped at a maximum amount of £320m - to both the independent body and the Treasury to cover liabilities that may be incurred in implementing the Alternative Remedies Package.

    RBS said the Alternative Remedies Package remains consistent with the £800 million provision that RBS took in relation to the expected costs of the packageas outlined in July.

    The EC’s seal of approval now removes one of the last remaining obstacles in RBS’ road to recovery and its ability to distribute excess capital to shareholders.

    RBS CEO Ross McEwan said: “We are pleased that we now have final approval from the European Commission for the Alternative Remedies Package. This allows us to resolve our final State Aid divestment obligation and brings welcome clarity for our customers and staff.

    “It also builds on the progress we have made already this year in resolving our major legacy issues through reaching a settlement with the Federal Housing Finance Agency, and resolving the 2008 Rights Issue litigation. We remain committed to resolving our last remaining major legacy issue, the investigation into our historic US RMBS activities.”

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