Royal Bank of Scotland (LON:RBS) has moved a step closer to avoiding the forced sale of its Williams & Glyn business after the government agreed ‘in principle’ with Brussels over an alternative plan. The FTSE 100 group was ordered to divest the business by the end of the year as a condition of its taxpayer-funded rescue, but has been struggling to meet the deadline.
RBS’ share price rose in the previous session, adding 0.44 percent to close at 252.30p, slightly outperforming the broader UK market, with the benchmark FTSE 100 index closing 0.24 percent higher at 7,452.32 points. The group’s shares have added just over a third to their value over the past year, and are up by some 12 percent in the year-to-date.
RBS announced in a statement yesterday that it had been informed that the European Commission and HM Treasury had agreed in principle over an alternative plan to promote competition in the market for banking services to small and medium enterprises in the UK. This revised package will be submitted to the EC's College of Commissioners for approval and if agreed, it will allow the lender to call off its sale of the Williams & Glyn business.
Under the alternative plan, RBS will be required to allocate £425 million to be used for funding a range of competitors in the UK banking and financial technology sectors. The lender will further provide £275 million of funding for eligible challenger banks to help them incentivise SME customers of W&G to switch their accounts and loans from RBS. The FTSE 100 bank will make another £75 million available to cover customers’ costs of switching. The package will cost RBS a total of £835 million once running costs are included.
“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,” the group’s chief executive Ross McEwan commented in the statement, adding that the bank was awaiting the formal decision on the proposal.
RBS is scheduled to update investors on its interim performance on August 4.