The Treasury has put forward plans to the European Union which could spare Royal Bank of Scotland from being forced to sell off Williams & Glyn.
The lender has struggled to offload the W&G branches, which it is required to do by the end of the year under the EU's state aid rules.
Now the Treasury and RBS have proposed an alternative £750 million plan to boost competition in the banking market in an attempt to appease officials in Brussels.
RBS is required to sell W&G as one of the conditions for the multibillion-pound bailout by the UK Government following the banking crisis, but has struggled to strike a deal.
The Treasury has been in talks with the European Commission (EC) for months about the situation and will now seek formal changes to the state aid commitments.
Competition commissioner Margrethe Vestager will propose to the College of Commissioners that they open proceedings to gather evidence on the new plan, which contains a number of measures aimed at helping small and medium-sized enterprises (SMEs)
RBS chief executive Ross McEwan said "Today's proposal would provide a path to increased competition in the SME marketplace. If agreed it would deliver an outcome on our EC state aid divestment obligations more quickly and with more certainty than undertaking a difficult and complex sale and would provide much-needed certainty for customers and staff."
The proposed package, which would cost RBS an estimated £750 million, involves:
: : A fund, administered by an independent body, which challenger banks can access to increase their business banking capabilities
:: Funding for eligible challenger banks to help them woo SMEs to switch their accounts from RBS
:: RBS granting business customers of eligible challenger banks access to its branch network for cash and cheque handling
:: An independent fund to invest in financial technology firms
A Treasury spokesman said: "RBS must deliver on its remaining state aid commitments and this new plan represents the most effective way of delivering the pro-competition objectives behind them.
"This new plan provides a clear blueprint to increase competition in the UK's business banking market, and would help RBS resolve one of its most significant legacy issues which has held back the sale of the taxpayers' stake."
Chancellor Philip Hammond has already said the Government does not expect to offload its 72% stake in RBS until after 2020.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here