The U.K. Treasury Select Committee will "keep a close eye" on Royal Bank of Scotland Group Plc's £425 million capability and innovation fund amid fears that another large bank may access the fund to support small-business lending, The [London] Times reported.
"Payouts from RBS to another large and established bank would risk defeating that objective," committee Chair Nicky Morgan said.
Banks with less than €350 billion in assets in the U.K. are eligible to apply for access to the fund, that is intended to support small-business lending. The Times said Spanish lender Banco Santander SA could be one of its chief beneficiaries. Banco Santander, although much bigger globally, has €300 billion in assets in the U.K., sparking fears that it could end up applying to access to what is public money, since RBS is 70% government-owned, according to the report.
The newspaper quoted Santander as saying the Treasury's measures "present an opportunity for us to help foster more meaningful competition" that would benefit the U.K.'s small firms. The report, however, did not confirm if Santander had applied for access to the fund.
In May, British challenger bank urged the EC to require U.K. government officials and RBS to meet them to discuss plans by the latter to set up the fund. The challenger banks added that the alternative plan was of "limited interest" to their peers that have no business current accounts.
The fund aims to distribute 15 grants of between £5 million and £120 million for eligible challenger banks and other financial service providers and also contains £350 million of funding to incentivize small and medium-sized enterprises to switch away from the former Williams & Glyn operations.