"There will of course be criticism of the large amounts of money RBS wasted on trying to spin off a challenger bank to meet its bailout terms, but hindsight is a wonderful thing"
The package includes a £425m Capability and Innovation Fund that will grant funding to a range of competitors in the UK banking and financial technology sectors, as well as measures designed to promote competition in banking services for SME customers.
This revised package is expected to come into effect during H2 2017, upon which RBS will no longer be obliged to achieve separation and divestment of the business previously known as Williams & Glyn by 31 December 2017.
RBS has already put aside £750 million for the programme, and will now set aside a further £50 million to cover additional costs in its forthcoming results.
RBS will also incur running costs for the duration of the scheme, which are estimated at around £35m and, should the uptake within the Incentivised Switching Scheme not be sufficient, could be required to make a further contribution, capped at £50m.
Ross McEwan, RBS CEO, 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.”
Laith Khalaf, Senior Analyst at Hargreaves Lansdown, commented: "RBS is putting the past to bed, and this new agreement represents another milestone in the bank’s long journey back to good health.
"There will of course be criticism of the large amounts of money RBS wasted on trying to spin off a challenger bank to meet its bailout terms, but hindsight is a wonderful thing. Brexit had a large part to play in quashing plans for a new challenger bank, and no-one saw that coming all those years ago.
"So far this year RBS has removed a number of thorns from its side, settling claims both here and in the US over its past misdemeanours. The costs incurred in these settlements have been painful, but necessary.
"The bank still faces the prospect of a large penalty from the US Department of Justice at some point, which is a major cause of concern and uncertainty for shareholders. However if RBS can continue making progress in dealing with its legacy issues, it can then start to look forward rather than back."
