Royal Bank of Scotland Group PLC will spend more than GBP800 million on measures to increase competition in the U.K. banking market to atone for breaking European Union rules following its bailout during the financial crisis, the U.K. government said Wednesday.
After its 2008 taxpayer rescue, RBS was told to split out 300 branches, to be sold to a competitor or launched as a stand-alone bank, with the aim of boosting competition in the U.K. and offsetting the impact of the GBP45.5 billion of state money used to prop up the bank. But RBS gave up on the branch sale earlier this year saying it was too complicated. The U.K. Treasury, which controls a 71% stake in RBS, and the European Commission have since been negotiating on a suitable remedy.
Continue Reading Below
On Wednesday the European Commission said it signed off on a plan that aims to transfer a 3% market share in the U.K. small business banking market from RBS to competing banks. The package will cost RBS GBP833 million ($1.085 billion), according to the U.K. Treasury. RBS said it would take an extra provision of GBP50 million in its accounts to cover the costs.
The European Commission's proposals build on suggestions laid out by the U.K. government earlier this year. These include getting RBS to hand money to other British banks so that they could lure small business customers away from the Scottish lender. This was alongside an RBS fund that these banks can tap to help improve their franchises.
Investors are watching negotiations closely as its resolution is seen as a key step toward the bank finally restarting dividends. If signed off by the College of Commissioners, the EU will adopt its formal decision in the autumn.
Write to Max Colchester at email@example.com
(END) Dow Jones Newswires
July 26, 2017 13:50 ET (17:50 GMT)