Challenger banks rage over delays to £775 million RBS competition fund

Smaller banks – such as Metro, Starling, TSB and CYBG – have been scrambling to prepare bids for the funding after the Government said the application process would launch in the first half of 2018, but lenders have yet to be given any further clarity on how to even apply.

A switching scheme – which will encourage SME customers to ditch their RBS account for rival banks – was also meant begin in the first half, but has yet to launch.

“We worked liked hell to get… ready,” one executive privately told the Press Association, explaining that preparations were launched in earnest last September.

But in the months that followed, “communication has been threadbare”.

“It’s costing us money,” another challenger bank boss disclosed.

One CEO explained that their bank had hired extra people to prepare for a raft of new SME customers who will be encouraged to switch their accounts from RBS as part of the incentive scheme.

They had hoped that details would be provided by the end of June, but are still waiting for the release of bid documents that will shine a light on the format, structure and eligibility requirements of the submissions.

Anne Boden, chief executive and founder of digital bank Starling, said: “It’s now almost 10 years since the financial crisis and since RBS took billions of pounds in bailout funding, and the subsequent consolidation in the banking marketplace.

“We will see further consolidation unless something is done about it. We are still waiting for the RBS remedies fund to be distributed,” she warned.

Clydesdale Bank parent firm CYBG spent £5 million preparing for the BRC application within a six-month period (Clydesdale Bank/PA)

Challenger Metro Bank said in April that it had spent £590,000 last year preparing its application, having publicly said it hopes to clinch £120 million in funding to take a larger slice of the business banking market.

Those costs pale in comparison to the £5 million amount spent by CYBG in the six months to March 31 alone, according to its interim results released in May.

Other banks expected to put forward bids, including Starling, TSB and Santander, have not publicly disclosed those figures.

Around £775 million is up for grabs as part of conditions attached to RBS’ bailout after the state-backed lender scrapped plans to sell off its 300-strong Williams & Glyn branch network.

RBS has been forced to encourage SME customers to switch to other lenders in hopes of increasing competition in the small business banking market, a scheme being overseen by the independent Banking Competition Remedies body (BCR).

The BCR will be charged with delivering the two-part funding package, comprised of a £425 million “capability and innovation fund” that will be shared among successful bidders to develop their current account, lending and payments offerings for business customers.

A separate £350 million pot will help challenger banks convince small and medium sized business – which were previously Williams & Glyn customers – to switch accounts and loans from RBS.

But the BCR only announced it had appointed chief executive Godfrey Cromwell and executive director Brendan Peilow at the start of May and has yet to announce its third appointment.

It also has yet to hire an external consultancy to evaluate the eventual bids.

Rumours have swirled over difficulties in recruiting for the BCR roles, given the need to find competent candidates without conflicts of interest in the banking sector.

It may also prove contentious for individual members, who will be choosing which banks will receive multimillion-pound sums.

The body said in May that it intended to “launch the package in the summer of 2018 and will provide in the coming weeks further detail on timelines and information for potential applicants”.

The influential Treasury Select Committee has also hit out at the programme for being “beset by delays”.

John Glen, the economic secretary to the Treasury, said last month that he was “hopeful that in the early autumn we would get some initial steer on the process that will be taken forward”.

HM Treasury, which was responsible for devising the alternative remedies package but is at arms’ length to the BCR itself, said: “We appreciate that challenger banks are keen to see the package come into effect, and BCR has assured us that it will announce further details, including timelines for implementation, very shortly.”

BCR declined to comment.