"This new plan provides a clear blueprint to increase competition in the UK’s business banking market, and would help RBS resolve one of its most significant legacy issues"
The proposal, put forward by HM Treasury with the agreement of RBS, would resolve RBS’ State aid commitments which require it to carry out five major divestments by 2017.
Four have been successfully implemented, but the sale of Williams & Glyn has to-date been unsuccessful.
RBS abandoned plans to launch Williams & Glyn as a standalone bank last year after reporting an operating loss before tax of £274m in H1 2016 and an attributable loss of over £2bn.
It then entered discussions with Santander, though negotiations later broke down, reportedly over the price tag for Williams & Glyn.
HM Treasury says that if adopted, this new plan "would finally remedy the distortion in the UK’s business banking market which flowed from the provision of state support, with greater speed and certainty than a divestment".
The Treasury is now seeking formal amendment to RBS’s State aid commitments with the European Commission.
The proposed package of measures would involve a fund, administered by an independent body, that eligible challenger banks can access to increase their business banking capabilities.
Funding for eligible challenger banks would help them incentivise SMEs to switch their accounts from RBS paid in the form of “dowries” to challenger banks to use to incentivise switching.
It also aims to include an independent fund to invest in fintech to support the business banking of the future
An HMT spokesperson said: "RBS must deliver on its remaining State aid commitments and this new plan represents the most effective way of delivering the pro-competition objectives behind them.
"This new plan provides a clear blueprint to increase competition in the UK’s business banking market, and would help RBS resolve one of its most significant legacy issues which has held back the sale of the taxpayers’ stake."
