LONDON (Reuters) – Britain’s Metro Bank, Starling Bank and ClearBank have been granted a total of 280 million pounds from a fund aimed at increasing competition in lending to small businesses.
Since the Banking Competition Remedies (BCR) scheme’s launch last year, Britain’s challenger banks and upstart digital-only rivals have been preparing bids for money intended to kick-start efforts to wrest customers away from Royal Bank of Scotland (RBS) and other mainstream lenders such as Lloyds and Barclays.
The BCR said it awarded Metro Bank 120 million pounds, Starling Bank 100 million pounds and ClearBank 60 million pounds.
The funding is from RBS as part of the 775 million pound scheme requiring the bank to boost competition in the sector as a condition of its bailout during the 2008 financial crisis.
BCR said it received 16 applications from six applicants and further grants will be awarded later this year.
The awards can only be spent on improving the financial products and services that are available to small and medium-sized companies.
It offers some respite for Metro, which last month announced unexpectedly that its risk-weighted assets had risen by about 900 million pounds, ramping up pressure on its core capital ratio and sending its shares to a record low.
Metro said on Friday that it would use the money to open new branches in northern England.
CYBG bank, meanwhile, said its application for a grant was unsuccessful despite putting forward the “strongest possible case” to explain how more investment would make it a more effective competitor than any other eligible bank.
Some 425 million pounds has been earmarked for banks to build their business account offerings, while smaller banks can bid on a separate 350 million pound pool to help encourage firms to switch accounts from RBS to a competitor.
RBS had originally been obliged to spin off its Williams & Glyn banking division, a scheme it abandoned as unworkable after spending more than a billion pounds on the project.
(Reporting by Huw Jones and Lawrence White; Editing by Rachel Armstrong and David Goodman)