The U.K. government’s mandate that the Royal Bank of Scotland (RBS) allocate about $1 billion for a fund intended to give a financial boost to industry competitors has hit roadblocks that could spark controversy as the first of the funds are issued.
Reports in the Financial Times on Wednesday (Feb. 20) said that Banking Competition Remedies, which was established to manage the RBS fund, is preparing to announce the first three winners of the money. But the publication noted that the largest candidates eligible to compete for the funds, including Santander and Handelsbanken, did not apply.
Santander reportedly cited economic uncertainty ahead of Brexit, while Handelsbanken said the funds would constitute receiving state aid, which is against the company’s policy.
Other financial institutions were left out of the running as they deal with their own scandals. Metro Bank is in the midst of fallout related to an accounting error, while TBS is under investigation following a botched IT project, reports said.
“There’s a pressure to show the money goes to organizations who … are trusted, who can be seen as dead-set guarantees to work,” explained Accenture Managing Director Tom Merry in an interview with the publication.
The front-runner expected to receive the largest portion of the funds is now CYBG, which recently acquired Virgin Money and operates the Clydesdale Yorkshire brand. According to reports, however, one bidder pointed to CYBG’s own history of allegations of mistreatment of business customers.
And while alternative challenger banks like Starling Bank and Tide are interested in the funds, reports noted that new market entrants do not yet have the clout to provide the breadth of services that larger corporate customers require.
Earlier this year, Tide announced it had partnered with ClearBank to compete for the RBS funds, with CEO Oliver Prill previously describing the initiative as a “once-in-a-lifetime opportunity” to boost competition in the small business banking sector.
In December, Banking Competition Remedies said it had chosen 11 financial institutions to compete for the funds.