Treasury ends oversight of £425m scheme for banks to help them after RBS bailout

The Treasury has refused to extend the supervision arrangements beyond this year.

Under the so-called State Aid rules, which were in place when the UK was a member state of the European Union at the time, RBS gave money to smaller challengers banks to develop their services for businesses customers in an attempt to promote competition and counter the market-distorting effects of RBS’s £45bn bailout by the government in 2008.

The Banking Competitive Remedies (BCR), which distributes funds and monitors their expenditure, will be shut down in February. The BCR published data that revealed 15 of the 24 recipients had “deliverables” outstanding, meaning they still have not completed the projects for which they were paid.

BCR issued a public notice months before it planned to liquidate itself. It stated: “No alternative reporting mechanisms have been set up for those awardees who still have outstanding deliverables. They will therefore be responsible for updating and holding themselves accountable on their public promises.”

There will be no one to supervise the way Metro Bank, Virgin Money and the Cooperative Bank, as well as specialist lenders such Atom Bank, deliver their delayed project and spend any remaining money.

Metro Bank has opened just four of its seven branches that it had promised to open by 2023. This is despite the fact that the bank was awarded the largest prize, £120m, in 2019. was unable to reach its goal of gaining 206,000 customers for business current accounts by the end of the year. Metro Bank’s spokesperson stated that the bank has made “good progress”, and is confident of reaching its store opening and account volume targets by 2025.

The Co-operative Bank, on the other hand, had only been able to reduce its 15-day process of opening a new account to seven days. This left a “notable” gap in meeting its 5-day target. The bank has only been able to capture 1.8% of UK SME’s market compared with the target of 2.1%.

BCR also said Virgin Money was behind its near-term customers targets without providing exact figures. The bank stated that it had met six of its eight commitments, and was on track to meet the remaining targets before 2025.

Treasury denied the BCR’s request to extend its term by at least 2024 earlier this year without putting in place any other monitoring system.

RBS (now known as NatWest Group) has refused to grant the BCR request. RBS has covered its operating costs, £15m, up until now.

The BCR has a limited power and, as a result, it can only recommend that lenders post updates on their website.

The 15 lenders have met some of their targets but many are still unfulfilled. The 15 lenders have cited a number of reasons, including the effect that the UK economic slowdown has had on business borrowing, and the tighter labor market, which made finding competent staff to work for their new services or expansions more difficult.

The Treasury stated: “The successful implementation the Alternative Remedies Package(ARP) resolved an important legacy issue for NatWest and facilitated further sales of government shareholdings whilst benefiting the SME Banking Market.

The Banking Competition Remedies have played an important part in monitoring the ARP up to this point and they’ve already made a recommendation to firms to continue to update any outstanding commitments moving forward.