Starling, Metro Bank and ClearBank seize £280m from the RBS Competition Fund

By Oliver Smith on 22nd February 2019

Challenger Banks

A disappointing morning for TSB, Co-operative Bank and CYBG.

Starling, Metro Bank and ClearBank seize £280m from the RBS Competition Fund
Image source: Starling

Three UK challenger banks this morning were awarded part of the long-awaited £280m first tranche of cash a fund set up by RBS in the wake of the bank's 2008 bailout.

Designed to increase competition in lending to small businesses, Metro Bank and Starling took the lion’s share of the fund, pocketing £120m and £100m respectively, while ClearBank picked up £60m.

Starling Bank’s CEO and founder Anne Boden, this week named winner of the Special Industry Contribution award at The AltFi Awards 2018, said she was "delighted" at the news.

“Starling will deliver an advanced fully-digital offering that connects SMEs with the financial solutions they need to thrive. This is the opportunity to bring new technology and a new approach to the sector.”

Starling announced it would make £913m of lending available to businesses customers by the end of 2023, and said it will launch an online portal for its 30,000 SME account holders by the end of 2019.

Metro Bank meanwhile said it would use the funding to open more branches in the north of England.

While TSB, Co-operative Bank and CYBG were unsuccessful in their bids, all is not over yet.

The total value of the overall RBS fund is £775m and today’s £280m was the first and largest of three pools of funding aimed at small business lending—the remaining three pools still contain around £145m in total, and digital banks including Monzo are understood to be applying.

Eleven challenger banks, including Monzo, Starling and Metro Bank, were selected in December to share a £350m fund aimed purely at boosting switching among SME customers, allocation of this funding is also due to be announced this month.

This morning’s news is great for the small and medium-sized businesses which make up 99.9% of all UK businesses, but which have been painfully underserved by traditional banks.

It’s also good news for those challenger banks chosen to share part of today’s fund, and share the upcoming tranches.

It may be not so good news for the far smaller digital business banks like Coconut, which has focused on sole traders until now, and will face an uphill struggle against increasingly well-funded rivals should it ever look to capture the SME market.

Comments

Alternative Income Forum 2019

Join AltFi for its third annual Alternative Income Forum, exploring closed-ended funds (investment trusts) specialising in generating an income using alternative assets such as specialist finance, P2P lending, direct lending, asset leasing and more. Hear from the leading investors and fund managers in this rapidly growing market.

18th June 2019


Companies in this Article:

ClearBank
Coconut
CYBG
Metro Bank
Monzo
RBS
Starling Bank
The Co-operative Bank
Tide