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Another headache for RBS as European Commission probes plan to abandon Williams & Glyn sale

It seems like an eternity since the European Commission (EC) told RBS that it needed to divest of some of its banking operations as a result of receiving state aid in the form of a bailout. The EC argued that it would be unfair to enjoy such a position of power in the UK banking market (particularly in the SME segment) having needed such an injection of government cash. Almost nine years on from receiving that funding, the bank is no closer to any such divestment, having seen three separate attempts fail. Its latest plan, providing incentives to customers for joining challenger banks and helping those banks improve their service offerings, is aimed at satisfying the EC’s wish to see greater competition. However, it seems that the EC is yet to be convinced and wants a better understanding of the proposal before giving it the green light.

This will only happen if it is satisfied that “the proposal has the same positive effect on competition as the divestment of Williams & Glyn would have had.” This is difficult to assess and it will therefore be interesting to see which way the EC rules on the matter.

The idea is very much a piece of out of the box thinking from RBS and the UK Treasury which shows that it is a last roll of the dice. Should the EC fail to be satisfied with the proposals, it is very difficult to see where RBS goes from here. There isn’t a buyer in sight and the IPO is dead in the water. The only outcome surely would be the abandonment of all plans to meet the EC’s demands. Given the UK’s triggering of article 50 in March 2017, the EC’s demands could well end up not mattering in any case.