RBS required to fund £750m to challenger banks

To meet State Aid obligations, the global banking firm will help smaller banks expand what they can offer to start-ups and small businesses

Royal Bank of Scotland (RBS) will be required to supply £750m funding to challenger banks in order to boost competition in the business banking industry and help more small businesses access finance.

With the aim of restructuring the banking market, the fund will help smaller retail banks develop and improve their small business offerings  and will provide incentives for companies that move accounts from RBS.

Business customers of eligible challenger banks will also be welcome to use RBS branches for the handling of cash and cheques.

The fund is part of an alternative plan proposed after RBS was unable to agree a deal to sell 300 branches of its Williams & Glyn businesses, demanded as part of the bank’s state bailout in 2008.

The new deal, devised by the Treasury and European regulators, is expected to allow the bank to meet State Aid obligations following the £46bn bailout.

In addition, RBS is expected to create an independent fund to invest in financial technology (fintech)   enterprises looking to make technological advances in business banking.

Rishi Khosla, co-founder and CEO of challenger bank OakNorth Bank, commented: “It’s important that this fund doesn’t just focus on current accounts, but that it is used to increase challenger banks’ capabilities to deliver a range of products and services, including short and long-term business loans.

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“According to the CMA’s retail banking investigation, 80% of small and medium enterprises bank with the big four, and 90% go to their current account provider as their first port of call when seeking a loan, so it is clear that more competition is needed.”


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