ROYAL Bank of Scotland is set to lose ground in the key small and medium sized enterprise market next year after the names of rivals who will benefit from a £275m scheme intended to promote competition were published.
Clydesdale Bank and Edinburgh-based Hampden & Co are included in a list of 11 banks that have been judged eligible to participate in the Incentivised Switching Scheme.
This will provide “dowries” of up to £50,000 to SME customers of Royal Bank’s former Williams & Glyn operation that switch to another provider.
It forms part of a £775m programme of remedies that RBS agreed to provide to address European regulators’ concerns about the £45 billion Government bailout the bank received during the financial crisis.
RBS had agreed to sell its Williams & Glyn operation but scrapped the plan after hitting obstacles.
Rivals hope to capitalise on the remedies programme to take a big share of the SME market from RBS.
The Clydesdale and Yorkshire Bank operations run by CYBG have high hopes that the scheme will help them accelerate growth in the SME market, which has long been dominated by bigger players.
CYBG chief executive David Duffy said: “We now have a great opportunity to offer an exciting new home for thousands of Williams & Glyn customers when the scheme opens next February.”
He said CYBG, which regards itself as the UK’s leading challenger bank, had invested £12m in preparing for the switching scheme.
Graeme Hartop, chief executive of Hampden & Co, said the firm was already looking after the banking needs of many business owners and was very excited to be taking part in the programme.
The other banks deemed eligible include TSB, which sees lots of room for growth in the SME market as it aims to overcome the problems caused by a botched IT upgrade in April.
Last month TSB announced that it had recruited CYBG chief operating officer Debbie Crosbie to become its next chief executive. It parted company with former chief executive Paul Pester in September.
The Incentivised Switching Scheme could also support the development of new internet-based banks that expect to win business from established players. Online banks Monzo and Starling were deemed eligible.
But it will only become clear next year which banks are set to get most direct help under the £775m alternative remedies programme.
Lenders can apply for a share of £425m capability and innovation funding, which is intended to help firms to develop their capability to compete with RBS for SME business and to develop related services.
Awards will be announced in three tranches from February to August.
Banks deemed eligible for the incentivised switching scheme must apply separately for capability and innovation funding support.
The schemes are administered by an independent body, Banking Competition Remedies. This was formed after the UK Government and European Commission agreed the terms of the £775m alternative remedies programme last year.
BCR’s chairman Geoffrey Cromwell said: “It’s very good news that a broad selection of organisations have stepped forward and made a diversity of offers across the SME client base.”
The other eligible organisations named by BCR were: Arbuthnot, Co-op Bank, Metro Bank, Nationwide, Santander and Handelsbanken.
It said two other organisations met the eligibility criteria and are expected to launch offers in 2019.
More applications from lenders that want to take part in the scheme will be considered next year.
SMEs will be linked with eligible providers by a dedicated RBS website. The size of dowries payable to firms that switch current accounts will vary from £750 to £50,000 depending on their turnover.
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