Thousands of UK small businesses which bank with RBS are being incentivised to change their banking facilities, says global advisor Duff & Phelps.
Duff & Phelps says this is likely to cause confusion for many small businesses without the time or resources to assess what options are now available in the wider market.
It saysRBS has contacted more than 220,000 small business customers with turnover under £25m to inform them of this new opportunity which has come as a result of the £45bn taxpayer-funded bailout for RBS at the height of the financial crash in 2008. The bank is being forced to provide £350m for rivals to offer incentives to its customers to switch, as well as £425m for a ‘capability and innovation fund’ to help other banks and finance firms expand their services to the SME sector.
Paul Smith, MD in the Debt Advisory practice at Duff & Phelps, explained that the so-called ‘alternative remedies package’ stemmed from the bailout that saved RBS from collapse. Since this qualified as State Aid under European Commission rules, the bank had to agree to reduce its size and market share. It was ordered to sell five parts of the business and while a home was found for four, the challenge arose when it came to its 220,000 SME customers. The original plan – to place all the customers into a newly reformed Williams & Glyn division – collapsed in 2013 and a later plan to float the unit also failed.
Mr Smith said: “Since the 2008 financial crash, the lending market has undergone seismic change with a number of new players entering the market. The question for those SMEs across the country is how can they make sense of all of this and do the right thing by their businesses? SMEs who have historically banked with RBS are now facing a highly complex and time-consuming dilemma, and without professional support we fear many SMEs may make ill-informed decisions.
“There is currently so much choice and cash available to SMEs in the market that this may present them with an opportunity to secure a significantly improved funding package, offering more flexibility at a reduced cost.”