Friday, 5 May 2017

Small banks demand Brussels forces Treasury talks over RBS sale




The UK's biggest challenger banks have asked Brussels to force Government officials to meet them for urgent talks over plans to carve out a large chunk of Royal Bank of Scotland’s (RBS) business lending operations.
 
Sky News has obtained a draft letter circulated among lenders including Secure Trust Bank, Aldermore, OneSavings Bank and Shawbrook outlining their dissatisfaction with a Treasury proposal that would end a seven-year effort to offload the business.


The letter, which is due to be sent later on Friday to Margrethe Vestager, the EU Competition Commissioner, argues that the Treasury's blueprint is destined for failure in its objective of boosting competition in Britain's small business banking sector.


"As the cohort of banks that have, in theory, the most to gain from the RBS proposals we are firmly of the view that the current proposals will fail and further significant changes are required if the goal of increasing competition within UK banking is to be achieved," the letter says.


Under a plan announced in February, RBS will be required to establish a £750m package of measures including a fund which incentivises SMEs to switch their accounts from the taxpayer-backed lender to challenger banks.


This would be an alternative to the sale of a network of around 300 branches, which RBS has repeatedly struggled to sell because of IT problems and other complications.


The network would have been rebranded under the revived name of Williams & Glyn or sold to another bank such as Santander UK, which twice attempted to buy it.


The challenger banks' letter argues that the latest plan will not match the original mandate laid out by the European Commission under the terms of RBS's £45.5bn bailout in 2008.


"By focusing on the distribution of business current accounts, the alternative package is of limited interest to challenger banks without business current accounts; as a standalone, the product itself is of marginal profitability, compounded by forthcoming capital requirements - Minimum Requirements for Eligible Liabilities - which carry additional capital requirements for current account providing banks with portfolios exceeding 40,000 accounts," it says.


The letter goes on to argue that Ms Vestager should consider "requiring RBS and HM Treasury to meet with us to agree mutually agreeable revised proposals for submission to you before the end of June 2017".
 
 
The demand for Brussels to force Treasury officials to meet the banks for talks is potentially incendiary given growing tensions over the terms of the UK's exit from the EU.


"Other alternatives include our willingness to discuss the divestment of assets across the SME banking market, potentially using the capital costs in the current proposals to either discount asset price and/ or 'top-up' loan pricing to make it commercially viable for alternative providers," it says.


The Times reported last month that the challenger banks were planning to write to the Commission about the RBS plans.


The management team lined up to run W&G resigned last month when it became clear that the creation of a viable standalone business was impossible.


RBS has spent billions of pounds on the project since 2010.


The Treasury said in February: "This is an important step forward in the process of resolving one of RBS' most significant legacy issues.


"We look forward to working with relevant parties to ensure the proposed plan delivers increased competition in the UK's business banking market as effectively as possible."






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