The EU on Monday approved British government plans for the bailed-out Royal Bank of Scotland to fund initiatives worth 750 million pounds to boost competition as part of its rescue conditions.
The bank, 73 percent owned by the government, had made four out of five sell-offs demanded by the European Commission in 2009 to address competition concerns following its bailout, but struggled to offload the last unit, Williams and Glyn.
The commission, the bloc’s executive arm, on Monday accepted an alternative proposal from London that RBS would fund a series of alternative initiatives aimed at boosting competition in the small and medium enterprises (SME) market.
“The Commission’s investigation concluded that the improved package is sufficient to replace the divestment commitment and will increase competition in the UK SME banking market,” the commission said in a statement.
A “capability and innovation fund” will be created to distribute funding to “challenger” banks to help them compete with RBS in the SME sector, where it is a dominant player, while a second fund will help banks offer incentives to customers to switch away from RBS.
Other large established banks, such as HSBC, Lloyds, and Barclays, were not eligible to benefit from the proposals outlined by the British government in February.
Edinburgh-based RBS was rescued with £45.5 billion of taxpayers’ cash at the height of the global financial crisis in late 2008 in the world’s biggest banking bailout.
Monday’s announcement comes after a five-month probe by the European Commission to assess whether the proposal was an appropriate alternative to selling Williams and Glyn.