It’s the treasure hunt being talked about by everyone in the commercial banking sector.
A £775m pot of cash has been made available by Royal Bank of Scotland to boost competition in small business banking.
The money has been made available by the bank as a condition of its £45.5bn bail-out by taxpayers during the financial crisis just under a decade ago.
The European Commission originally required, in return for waiving its rules on state aid, RBS to hive off a chunk of its branches and business customers to a new business that was to have been christened Williams & Glyn – reviving a centuries-old name owned by RBS.
But demerging Williams & Glyn proved problematic, costing RBS more than £2bn in the process.
So in September last year, the Commission agreed RBS could instead provide a package of cash to be made available to rivals for them to lend to small businesses.
The next step in the process has now happened, with Banking Competition Remedies (BCR), the government-backed vehicle that will oversee how the package will be distributed, confirming applications for the money will open in November.
Winners will find out how much of the cash they will get their hands on in February next year.
Among the likely applicants are Santander UK, Nationwide Building Society, TSB, Metro Bank, CYBG – which is in the process of buying Virgin Money – Aldermore and Starling Bank.
However, all have been infuriated by the time taken to dole out the readies, having been told last autumn the process would begin in June this year.
All of the bidders have already spent considerable sums preparing to apply for some of the money.
CYBG, which like Metro Bank, Starling Bank and Santander UK is expected to bid for the largest chunk of up to £120m, said recently it had already spent £5m in preparations.
Metro Bank has spent nearly £600,000.
Anne Boden, the founder and chief executive of Starling Bank, has warned that, unless the money is disbursed quickly, there is likely to be further consolidation in the sector along the lines of the recent takeovers of Virgin Money and Aldermore which, earlier this year, was bought for £1.1bn by the South African lender FirstRand.
One banking executive told the Financial Times in May: “We were originally told the package would be ready by the end of the year. I guess it was our mistake not to ask which year.”
The delays are also understood to have irritated RBS itself.
It made the money available some time ago but has been wrongly blamed in some quarters for the delays.
BCR admitted today that it was to blame for the hold-up which, it said, reflected the “later than anticipated” appointment of its directors – executive chairman Lord Cromwell, a former Barclays employee; executive director Brendan Pellow, a former Lloyds executive; and Aidene Walsh, whose appointment was only announced today.
Non-executive directors are also due to be appointed but BCR has yet to even hire a head-hunting firm to advise on the appointments.
Lord Cromwell said: “We have been working collaboratively with stakeholders to ensure that the company is put on its feet successfully and appropriate due diligence applied, vital on an innovative project like this and where large sums of money are being disbursed.”
How the BCR eventually divvies up the cash is likely to be the subject of much scrutiny.
Some of its rivals are indignant that Santander, the UK’s third-largest mortgage lender and which can hardly be described as a scrappy outsider, is even being allowed to compete for funds.
The established “big four” of RBS/NatWest, Barclays, HSBC and Lloyds already account for more than seven in 10 business current accounts, and that rises to four in five once Santander UK is included.
Rivals have also grumbled about the decision of Nationwide, the UK’s second-largest mortgage lender and an increasingly formidable competitor in current accounts, to bid for funds when it did not previously have any small business lending operations.
There will also be particular attention in the industry, given the problems with its recent IT migration, to how much money TSB bids for.
In the meantime, as the first anniversary approaches of RBS’s agreement with the European Commission to put a package in place, the lack of competition in the small business lending market drags on.