Is RBS attempting to shed small businesses?

Is RBS attempting to shed small businesses?

RBS is potentially forcing customers to leave to comply with requirements for it to shed some of its small business customer base to competitors.

As many will recall, Royal Bank of Scotland was saved from collapse by a £45.5 billion bailout from the UK Government in the wake of the 2008 financial crisis. This has been viewed by many as an unfair advantage over fellow banks and competitors. As quoted in the Financial Times, Paul Lynam, chief executive of Secure Trust Bank has said, “Had RBS gone bust, its customer base would have been picked up by a whole host of other banks, so it’s stopping them from benefiting in the way they would have done had the normal rules of the market applied.”

Mr Lynam’s sentiments were not isolated and as of last year RBS was required to provide funds worth £833 million to be provided to competitors looking to enhance or establish their own small business current account offerings.

The plan was imposed by the Government and European Commission in the wake of a failed attempt by RBS to establish its own challenger bank, Williams and Glynn, which was to be sold to competitors. The new bank, however, was deemed unable to stand on its own, which according to The Telegraph, was due to having insufficient capital “without further funding from RBS”.

Both initiatives were designed to force RBS to shed some its customer base in the wake of its Global Restructuring Group scandal and to promote more competition away from the largest four banks – RBS, Lloyds Banking Group, HSBC and Barclays.

This Is Money has this week published details of discussions held in the RBS annual general meeting held last month and have highlighted comments made by bank chairman, Howard Davies, which suggest that RBS’s current string of branch closures is also linked to the above objective.

The comments made by Mr Davies suggest that the branch closures have been designed to force customers to move to competitors once they lose access to local branch services. As quoted Mr Davies noted, “It is not possible for us to keep all our branches open if we are forced to transfer customers, which is what we are forced to do indeed. It would be difficult for customers to transfer or get them to transfer if their branches were still open.”

Whether this is a genuine strategy by RBS or just an attempt to put a positive spin on cost-cutting measures for MPs and aggrieved GRG customers who are watching them closely remains to be seen.

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