State-owned RBS is set to be transformed by a HM Treasury deal amendment, turning it into a fund for new challenger banks entering the financial services sector.
This latest proposal comes in light the failure of RBS to divest of the operations of the bank Williams and Glyn, an organisation which consists of 307 RBS branches.
RBS was required to divest a part of its business by the European Union when HM Government took an 84% stake during the 2008 financial crisis. The rescue of RBS was deemed state-aid.
The initiative is set to transform the bank into a platform to accelerate the progress of new banks. It will be an independent fund targeting investment in fintech.
The initiative will also mean that the customers of smaller banks will be able to have access to the RBS network for cash and cheque management.
The extra funding received from RBS will arm the smaller challenger banks with the means to give incentive to small and medium sized enterprises (SMEs) to switch to their services.
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The bank has already made other recent moves towards supporting fintech startups, an example of this is the fintech accelerator opened as a HQ in Edinburgh. For this scheme the bank’s Technology Relationship Team are assigned to work alongside the new businesses.
Read more: The open banking revolution – what does it mean for fintechs and banks?
These new initiatives have arrived amid a storm of interest in fintech, with Mark Carney, Governor of the Bank of England recently commenting on the possible benefits of fintech by saying: ‘Such diversification could be positive for stability; after all the existing tiered and highly concentrated system has created single point ofailure risks’.
As reported by Finextra, a HMT spokesperson said: “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.”
