UK challenger banks Santander, Metro Bank, Clydesdale Bank, Starling and TSB are all pitching for a share of the Royal Bank of Scotland (RBS) alternative remedies package.
The overall package will cost RBS £775 million and is designed to increase competition in the small business banking sector, with the funds to be split between challenger banks and fintechs.
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It was agreed between RBS, the UK Treasury and the European Union after RBS failed to sell off its Williams & Glyn brand — a condition of its 2008 financial crisis bailout.
Three of the likely five runners will win a share of the largest part of the RBS giveaway, the capability and innovation fund worth £425m.
To qualify, banks must have less than £350 billion in UK assets, so Santander’s UK arm qualifies with assets of around £300 billion.
Each of the likely runners has issues to address. The independent panel to oversee the process is still to be finalised by the UK Treasury.
Prior to its IT meltdown, on paper TSB looked well placed to pitch for a successful share of the RBS fund.
TSB is now ten days into a public relations nightmare arising from its botched IT platform migration. It has had ongoing issues with standing orders and faster payments remain unavailable for a large number of customers.
The IT issues have resulted in TSB’s chief executive Paul Pester being summoned to a hearing before the influential Treasury Select Committee.
TSB currently has a minimal share of the UK small business banking sector and has issues to address that it has the banking expertise to allow it to win a share of the package.
That aside, until and unless it satisfies regulators that its current IT issues have been addressed and its new Proteo4UK technology platform is resilient, it is hard to see TSB having a case to benefit from the RBS package.
The one thing that may rescue TSB’s claim is the inordinate delay in progress being made with the RBS giveaway. The head of one of the challenger bank’s told the writer that it would be no surprise if the saga dragged on into 2019.
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It is hard to assign the epithet of challenger to Santander.
Santander’s UK arm is well established, having acquired former mutual Abbey in 2004. In 2008, it added Alliance & Leicester and Bradford & Bingley.
The Glasgow-headquartered Clydesdale is an experienced player in the small business banking sector in Scotland and the North.
It is well placed to bid for a share of the RBS fund but has minimal presence in the South of England, where many of the up to 220,000 customers of the Williams & Glyn part of RBS to be incentivised to switch, are based.
This digital bank startup has strong claims on the innovation side but no experience of small business banking.
Already punching above its weight in the small business sector, it has a strong claim for a share of the fund, but its branch focus remains in the south of the UK in general and Greater London area in particular.