EU probes RBS alternative to Williams & Glyn sale

The European Commission said on Tuesday it opened an “in-depth investigation” to assess whether an alternative package proposed by UK authorities “is an appropriate replacement for the commitment for the Royal Bank of Scotland to divest Williams & Glyn, required as part of its restructuring plan.”

The alternative plan would replace the requirement for RBS to sell about 300 of its branches under a revived Williams & Glyn brand by December 31, 2017 as a condition of European Commission rules for receiving a £45 billion UK government bailout during the financial crisis.

The alternative calls on RBS to spend £750 million on alternative measures to encourage competition in UK business banking.

The UK government still owns more than 70% of RBS.

EC commissioner Margrethe Vestager, in charge of competition policy, said: “RBS is the leading bank in the UK SME banking market and received significant state support during the financial crisis.

“The Commission is now seeking the views of all interested parties on an alternative package proposed by the UK to replace RBS’s commitment to divest Williams & Glyn.

“We can only accept this proposal if it has the same positive effect on competition as the divestment of Williams & Glyn would have had.

“This is important for fair competition.”

The EC said RBS had made significant efforts to divest Williams & Glyn.

“So far the successive divestment attempts have not been successful,” said the Commission.

“RBS launched a new trade sale process in 2016.

“However, according to the UK authorities, RBS only received bids for parts of Williams & Glyn but not the full business, and they would not be completed before the sale deadline of 31 December 2017 under the commitments.

“For these reasons, the UK authorities are seeking to amend the commitment to divest Williams & Glyn, by substituting it with an alternative package.

“The package of alternative measures proposed by the UK authorities in March 2017 involves an estimated upfront cost for RBS of around £750 million plus an ongoing reduction in RBS’s earnings.”

The EC said the alternative plan includes:

  • a fund, to be administered by an independent body, that eligible challenger banks could access to finance the increase of their SME banking capabilities
  • funding for eligible challenger banks to help them to encourage SMEs to switch their accounts from RBS to them
  • RBS granting SME customers of eligible challenger banks access to its branch network, to support the above measures
  • an independent fund to invest in innovative financial services (mainly the financial technology industry – also known as FinTech)

“According to the UK authorities, the alternative package, if accepted by the Commission, would remedy the distortion in the UK’s SME banking market resulting from the state aid to RBS, with greater speed and certainty than would the divestment of Williams & Glyn,” said the Commission.

“The Commission can only accept modifications to existing commitments by Member States and aided banks that were given to obtain approval for restructuring aid (such as the one leading to the existing RBS restructuring decision), if the new commitments can be considered equivalent to those originally provided.

“The UK’s alternative package comprises a set of novel behavioural measures, the effect of which is difficult to quantify on the basis of information currently available to the Commission.

“The Commission is therefore opening an in-depth investigation to give interested third parties, as well as the UK, an opportunity to submit comments during one month following the publication of this opening decision.

“This opening of an investigation does not prejudge its outcome.

“The Commission will carefully review the responses received before taking a final decision on whether or not to accept the alternative plan, which if accepted would allow RBS to meet its final commitment under the state aid decision and swiftly close the case.”