Co-op Bank to bid for RBS fund

The Co-operative Bank has confirmed that it will bid for a slice of Royal Bank of Scotland’s £775 million fund aimed at increasing competition in Britain’s banking sector.

The lender, which is challenging high street stalwarts for a share of the retail banking market, will initially target grants worth up to £120m to develop its business current accounts.

It is aiming to expand its current account and lending services for small companies that have turnover below £2m and for “ethically minded” SMES (small and medium-sized enterprises).

Co-op Bank will also apply for the £350m incentivised switching scheme that aims to encourage small business customers to ditch their RBS account for rival lenders.

The bank already has more than 90,000 small business customers, representing 2 per cent of the small business current account market.

Other challenger banks such as Starling, CYBG and Metro Bank, as well as Nationwide Building Society, have said they will bid for the fund.

RBS’S alternative remedies fund is part of conditions attached to its £45 billion government bailout during the financial crisis, which will be distributed by the Banking Competition Remedies body.

Winners of the first round of financial awards are expected to be announced in February.

Last year, the Co-op Bank reached a £700m deal with hedge funds that saved it from a potential collapse. However, the company is seen as being on the road to recovery after it recently posted a narrowed loss for the first nine months of the year.

Chief executive Andrew Bester said: “The Co-operative Bank is now in a position to put the issues of the past behind it and to once again play an important role in bringing more competition to the market - and this is no more needed than in the business banking market, where five providers hold 85 per cent.”