Setback to £775 million RBS competition fund blamed on executive hiring delays
The financial awards will finally be announced in February 2019.
A failure to appoint executive directors on time has been blamed for putting the distribution of a £775 million banking competition fund nearly six months behind schedule.
Challenger banks, such as Metro, Starling, TSB and CYBG, have been scrambling to prepare bids for the funding after the Government said the application process would launch in the first half of 2018, but have waiting months for an update.
The cash, which come from Royal Bank of Scotland as part of
conditions attached to its £45 billion Government bailout during the financial crisis, has been delayed due to recruitment of executives to the newly formed Banking Competition Remedies body (BCR)
The new timeline, “reflects the later than anticipated … appointment of the two current directors of BCR and the knock-on effects arising”, the BCR said.
Rumours have swirled over difficulties in recruiting for the roles, given the need to find competent candidates without conflicts of interest in the banking sector.
The BCR only announced it had appointed executive chair Godfrey Cromwell and executive director Brendan Peilow at the start of May, and on Monday announced its third appointee Aidene Walsh
It has yet to hire an external consultancy to evaluate the eventual bids is still waiting to appoint an undisclosed number of non executive directors.
Staff, who are still being recruited, will join “over the coming months”.
BCR assured on Monday that after “an intense period of set-up” it was now “operationally ready to oversee the package of measures designed to enhance competition in the UK SME banking market”.
It will start accepting bids for the £425 million “capability and innovation fund”, meant to help bidders develop their current account, lending and payments offerings for business customers, on November 1.
Applications for a separate £350 million incentivised switching scheme that will encourage SME customers to ditch their RBS account for rival banks will open just days later.
The financial awards will be announced in February 2019.
It leaves the scheme running at least six months behind its original schedule.
The body said it will hold a “market event” for eligible banks in late September, which will outline how to apply, and promised that “more details” will be provided in the second half of August.
The months of delays have frustrated challenger banks who had been expecting to put forward applications by June, but had not been given any details on the format, structure and eligibility requirements of the submissions.
“We worked liked hell to get… ready,” one executive privately told the Press Association, explaining that preparations were launched in earnest last September.
But in the months that followed, they said communication had been “threadbare”.
It’s now almost 10 years since the financial crisis and since RBS took billions of pounds in bailout funding, and the subsequent consolidation in the banking marketplace. We will see further consolidation unless something is done about it. Anne Boden, chief executive of Starling Bank
“It’s costing us money,” another challenger bank boss disclosed.
One CEO explained that their bank had hired extra people to prepare for a raft of new SME customers who will be encouraged to switch their accounts from RBS as part of the incentive scheme.
Anne Boden, chief executive and founder of digital bank Starling, said: “It’s now almost 10 years since the financial crisis and since RBS took billions of pounds in bailout funding, and the subsequent consolidation in the banking marketplace.
“We will see further consolidation unless something is done about it. We are still waiting for the RBS remedies fund to be distributed,” she warned.
Challenger Metro Bank said in April that it had spent £590,000 last year preparing its application, having publicly said it hopes to clinch £120 million in funding to take a larger slice of the business banking market.
Those costs pale in comparison to the £5 million amount spent by CYBG in the six months to March 31 alone, according to its interim results released in May.
Other banks expected to put forward bids, including Starling, TSB and Santander, have not publicly disclosed those figures.
RBS said it was “pleased” the BCR has provided clarity on the timeline, which will mean it can provide “more certainty” to its own customers who are eligible for the business banking switching scheme
BCR executive chair Mr Cromwell said: “We have been working collaboratively with stakeholders to ensure that the company is put on its feet successfully and appropriate due diligence applied, vital on an innovative project like this and where large sums of money are being disbursed.”