The European Commission has launched an "in-depth investigation" into Royal Bank of Scotland Group Plc's proposed alternative plan to selling Williams & Glyn, which it had been required to divest by 2017-end as part of the conditions of its 2008 bailout.

RBS has failed to divest the 300-odd branch business, and put forward an alternative plan that would cost the bank £750 million upfront, as well as an ongoing drop in earnings. It involves RBS creating a fund to help support so-called challenger banks and financial technology development. This comprises "a set of novel behavioral measures, the effect of which is difficult to quantify," the EC said.

"We can only accept this proposal if it has the same positive effect on competition as the divestment of Williams & Glyn would have had. This is important for fair competition," EU Competition Commissioner Margrethe Vestager said.

Interested third parties have one month to provide feedback on RBS' alternative plan before the EC makes a decision on whether the new measure is satisfactory.

The U.K. Treasury said the same day that it will carry out a separate market testing exercise to determine whether the alternative plan will significantly increase competition and to ensure that it will work well operationally. The test will run for four weeks beginning April 17.

The Treasury is also accepting comments from parties impacted by the alternative plan, such as challenger banks, SMEs, and financial technology firms.