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RBS: Europe deal paves way for Treasury share sale

UK taxpayers are a step closer to selling down their 71% stake in Royal Bank of Scotland after the Treasury struck a new deal with Brussels.

 
RBS: Europe deal paves way for Treasury share sale

 

UK taxpayers are a step closer to selling down their 71% stake in Royal Bank of Scotland (RBS) after the Treasury struck a new deal with Brussels over its bailout of the bank in 2009.

The European Commission has ‘agreed in principle’ to a revised £835 million RBS-funded scheme to promote competition in the UK’s small business banking market.

This follows the failure of RBS’s attempt to spin off around 300 branches under the Williams & Glyn brand. This was the EC’s previous requirement for the £45.5 billion of state aid the bank received in its rescue in the financial crisis.

RBS, which will now keep the branch network, has already set aside £750 million for the scheme that to help smaller ‘challenger’ banks such as TSB, Metro (MTRO) and Clydesdale and also encourage small business customers to switch accounts to its rivals.

Under the new agreement, RBS will have to stump up a further £50 million and incur an estimated £35 million in running costs.

Resolving the issue of state subsidy was the main block to the Treasury’s wish to start reducing its stake in RBS, having sold its last shares in Lloyds (LLOY) earlier this year.

RBS chief executive Ross McEwan (pictured) said: 'We welcome the progress that HMT and the EC Commissioner responsible for competition have made on agreeing an alternative package of remedies to increase competition in the SME [small-medium enterprises] marketplace. We await a formal decision on this proposal which would allow us to resolve our final state aid divestment obligation.'

The bank has strived to settle issues from the credit crunch. It recently agreed to pay £3.65 billion in a settlement with the US Federal Housing Finance Agency for its role in selling mortgage backed securities before the financial crisis. It still faces a fine from the US Department of Justice over the same issue.

RBS also settled out of court with the last shareholder action group suing the bank over its controversial 2008 rights issue, in which investors accused it of withholding the truth of its financial predicament at the height of the crisis.

RBS shares eased 0.3p to 252p. They have risen 12% this year.

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