RBS plan to offset aid probed

Royal Bank of Scotland (RBS), Britain’s largest taxpayerowned bank, faces an in-depth EU review into whether a new plan to satisfy the conditions of its bailout is equivalent to selling its Williams & Glyn unit.

The alternative plan, which includes the bank helping to fund its competitors in smallbusiness lending, contains “novel behavioural measures, the effect of which is difficult to quantify”, the European Commission said on Tuesday.

The regulator said interested third parties had one month to submit comments.

RBS failed to sell Williams & Glyn, which was required as part of its 2009 bailout to increase competition in lending to small- and medium-sized enterprises, amid issues in separating the unit’s technology platform. Instead, the UK offered an alternative package in February that has an estimated upfront cost for RBS of about £750m and forces the bank to help its rivals poach clients.

“We can only accept this proposal if it has the same positive effect on competition as the divestment of Williams & Glyn would have had,” EU competition commissioner Margrethe Vestager said. “This is important for fair competition.”

The UK Treasury said on Tuesday that it would perform a “market-testing exercise” for four weeks starting later in April. The test is aimed at ensuring the new plan does increase competition in business lending.

For RBS, reaching an agreement on Williams & Glyn is one of the final obstacles before the bank can resume dividend payments for the first time since its £45.5bn bailout. Failure to reach a deal could result in measures, including the full repayment of state aid the bank received in the crisis.