#StateAid: European Commission formally approves RBS’ Alternative Remedies package

Following agreement in principle reached on 26 July 2017 between Competition Commissioner Vestager and the UK Government (see UK Gov’t publishes update on RBS’s remaining #StateAid obligations), the European Commission has now formally approved the Alternative Remedies package proposed by the UK to replace the commitment for Royal Bank of Scotland (RBS) to divest Williams & Glyn as a condition of its 2014 (ex 2009) State Aid rescue & restructuring plan.

The Alternative Remedies Package agreed between the Commission and the UK is focused on the following two remedies to promote competition in the market for banking services to small and medium-sized enterprises (“SMEs”) in the UK, where the RBS is dominant:

  • A £425m Capability and Innovation Fund that will grant funding to a range of competitors in the UK banking and financial technology sectors; and,
  • A £350m Incentivised Switching Scheme which will provide funding to eligible challenger financial institutions to enable them to offer incentives to encourage RBS’s SME banking customers to switch their business current accounts, deposit accounts and loans.

The package targets a transfer of a 3% market share in the UK SME banking market from RBS to challenger banks, however, should the uptake within the Incentivised Switching Scheme not be sufficient, RBS may be required to make a further capped £50M contribution.

On this basis, the Commission approved the UK’s Alternative Remedies package and replaces the existing requirement to divest the business previously described as Williams & Glyn (or “Project Rainbow”) by 31 December 2017.

The non-confidential version of this decision will be made available under the case number SA.47702 in the State Aid Register of the European Commission’s Competition website once any confidentiality issues have been resolved.


RBS is one of Europe’s largest financial services groups and had a balance sheet of £799 billion at the end of 2016. During the financial crisis, in late 2008, RBS was on the verge of collapse and has benefitted from the following state aid measures:

  • a recapitalisation of £45.5bn and an (eventually unused) five year contingent recapitalisation of £8bn
  • an impaired asset measure covering excess loss (which was terminated with RBS not having received any payments from the State, but instead paid a cumulative fee of £2.5bn for the participation) and
  • guarantees and other liquidity measures (now fully repaid).

These aid measures resulted in the UK Government holding the majority of RBS’s shares and were accompanied by the restructuring of RBS approved by the Commission in 2009 and amended in 2014.

As part of this restructuring, the UK committed RBS would undertake a significant balance sheet and risk reduction. RBS has already delivered on those commitments to ensure the bank’s long-term viability, in line with the Commission decision.

It also delivered on all its other divestment commitments (sale of RBS insurance, transaction business, commodity trading, US banking subsidiary), which were made to ensure adequate own contribution by the Bank to the financing of the restructuring of the core UK banking operations and to limit the distortion of competition.

The divestment of Williams & Glyn, to be completed by end-2017 is the last outstanding commitment. This commitment has now been replaced with the new commitments from the UK relating to the Alternative Remedies package.