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Starling chief slams Treasury over RBS fund allocation

12 April 2018  |  11456 views  |  2 Pound note Queen Close up

Anne Boden, chief executive of Starling Bank, has hit out at the Treasury over its decision to allow some of the UK's largest banks to bid for millions of pounds of funding from a Royal Bank of Scotland bailout fund intended to boost competition in the SME business banking market.

Royal Bank of Scotland was directed by the government and the European Commission to set up two funds worth a combined £775 million following its £45.5 billion bailout during the financial crisis. £445 million of funding was earmarked for challenger banks pushing into the business banking market. Banks with assets up to £350 billion in the UK are eligible to bid for the fund.

Writing in City AM, Boden said: “Banks such as Santander, Clydesdale and TSB are all signalling their intent to bid for some of the largest awards. If they are awarded money from the RBS fund, an important opportunity to really disrupt the market by channelling the money to the new generation of startup, or challenger, digital banks, will have been lost. Santander has £300 billion, TSB £42.5 billion and Clydesdale £43.2 billion. Even the largest award of £120 million will have little impact on banks that have attained this mass.”

Starling is applying for one of the three biggest grants ranging from £60-£120 million pounds for its own entry into business banking.

By setting the bar for applications so loosely, the Treasury is in real danger of undermining the ultimate goal of the fund which is to cut RBS’s market share and stimulate competition away from established high street banks, says Boden.

“The RBS fund has a chance to help truly disrupt the market by supporting real innovators. Because they are starting from scratch, building their own proprietary technology from the ground up and based on consumer needs, they can deliver more with certainty at a lower cost and in less time," she writes. “They can give SME customers accounts that can be opened in a matter of minutes without the traditional bureaucratic trappings of business banking which favours bigger companies. But there remains a risk that it could merely further entrench the big players, at the cost of entrepreneurs and small business owners.”

Comments: (2)

A Finextra member
A Finextra member 13 April, 2018, 07:55

lets slam the bigger challenger banks so we can get a larger share of the RBS fund.  The bigger challenger banks (Santander, Clydesdale and TSB) already have an established SME and Mid Market banking service, have plenty of experience in this industry, understand the customer needs and know what it takes to create a more competitive market.  What are Starling going to do in this space - launch a new app.

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Michael Harte
Michael Harte - Okapi Solutions Ltd - London 24 April, 2018, 14:16

IMHO I think Anne Boden is right here.  The 'vision' (and in order to avoid mandatory EU fines) was to enable the diversification of the UK banking sector.

Nothing against the larger banks, but this action appears to have the effect of reducing the sums available to the challenger banks to invest in growing their businesses and thereby effectively challenging the established banks?

A fairer option, perhaps, may be to allocate a lower proportion of the available funds to those tier 1 & 2 banks?

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