Discussion – 


Discussion – 


End of £425M Bank Support Scheme Oversight by Treasury Post-RBS Bailout

Background: The RBS Bailout and State Aid Rules
Following the 2008 bailout of the Royal Bank of Scotland (RBS), a £425m fund was established to support smaller challenger banks. This was aimed at enhancing competition and balancing out the market-distorting effects of the RBS’s massive government bailout. These initiatives were in line with the state aid rules, applicable when the UK was an EU member.

End of Oversight: BCR’s Closure
The Banking Competition Remedies (BCR) body, responsible for the allocation and monitoring of these funds, is set to conclude its operations in February. Recent data from the BCR indicates that 15 out of the 24 beneficiaries have yet to fulfill their project commitments. With the BCR’s impending shutdown, there will be no dedicated entity to supervise the progress and fund utilization of banks like Metro Bank, Virgin Money, the Cooperative Bank, and others.

Metro Bank’s Slow Progress
Despite being granted £120m in 2019, Metro Bank’s progress has been below expectations. Their commitment to open seven new branches by 2023’s end has seen only four realized. Furthermore, the bank fell short of its target number of business current account customers. While a spokesperson for Metro Bank remains optimistic about meeting future goals, the bank’s past performance raises concerns.

Co-operative Bank and Virgin Money’s Struggles
The Co-operative Bank has managed to reduce its account opening process time but still falls short of its ambitious targets. Virgin Money, too, is lagging in its customer acquisition goals. Both banks, however, remain hopeful of achieving their set targets by 2025.

Treasury’s Decision and BCR’s Future
Despite appeals from the BCR for an extension until the end of 2024, the Treasury declined the request earlier this year. The reasons behind this decision remain undisclosed. With the BCR’s operational costs of £15m, covered by RBS, there’s uncertainty about future monitoring mechanisms. The BCR’s diminishing authority now merely suggests that banks should update their progress on their respective websites.

Lenders Cite External Factors
Several banks attribute their slow progress to broader economic challenges. Factors such as the UK’s economic downturn affecting business borrowing and the tightened labor market, making staffing challenging, have been cited.

Treasury’s Stance on the ARP
The Treasury emphasized the success of the Alternative Remedies Package (ARP) in addressing key issues for NatWest, thereby aiding the SME banking sector. While acknowledging the BCR’s role in overseeing the ARP, the Treasury also highlighted the importance of ongoing updates from banks regarding their commitments.


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