RBS likely to avoid compulsory sale of Williams & Glyn branches
Royal Bank of Scotland is likely to avoid the compulsory sale of its Williams & Glyn branches by doling out £835 million to help boost competition among UK banks.
It follows a joint review by the European Commission (EC) and HM Treasury, which have put forward the "alternative remedies package" that will help fulfil RBS's state aid obligations following its Government bailout at the height of the financial crisis.
The package includes plans for a £425 million fund aimed at competitors across the UK's banking and fintech sector, as well as a £350 million pot meant to help challenger banks convince small and medium sized business - which were previously Williams & Glyn customers - to switch accounts and loans from RBS.
RBS will shell out an another £60 million to cover additional costs, which will help cover the proposal's implementation.
The proposal, which still requires approval by the EC's College of Commissioners, will save RBS from hiving off the near-300 Williams & Glyn branches, having struggled to find a buyer ahead of its deadline which was set for the end of 2017.
A decision by the College of Commissioners that could cement the terms of the proposal is expected in the second half of the year.
It means UK challenger banks could gain access to those funds by the first quarter of 2018.
RBS chief executive Ross McEwan said: "We welcome the progress that HMT 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."
RBS has so far provisioned £750 million of those costs, which were reflected in its 2016 annual results.
It will now put aside an extra £50 million, which will be recorded in its first half earnings set to be released on August 4, and will incur running costs of around £35 million over the coming years to fund the rest of the scheme.
However, RBS could be required to make further contributions to the scheme, which will be capped at £50 million.
The Government said it is now working with the Commission to formalise the plan, which will include details on how to implement the funding programmes.
Stephen Barclay, the economic secretary to the Treasury, said: "The announcement today will help boost competition in the business banking market and marks another significant milestone in resolving a major legacy issue at RBS.
"It builds on the recent settlement with the Federal Housing Finance Agency and together they show the progress being made to resolve RBS's outstanding issues."
Mr Barclay was referring to recent news that RBS, which is still around 73% owned by the Government, reached a £4.2 billion US settlement over claims it mis-sold toxic mortgage bonds in the run-up to the financial crisis.