The banks will be tasked with boosting competition among small business lenders.
Nationwide Building Society, Investec Bank and The Co-operative Bank have been granted a total of £80m from a fund set-up to boost small businesses lending in Britain.
The Board of Banking Competition Remedies (BCR) has awarded £50m to Nationwide, £15m to Investec and £15m to Co-operative Bank to beef up small business banking competition through “the modernisation of existing business current account offerings or the development of new business current accounts.”
The BCR has £775m in total to hand out to UK lenders to improve competition among the country’s banks.
New business accounts
The fund was set up with cash from the Royal Bank of Scotland (RBS), and is part of European Union conditions attached to the £45bn government bailout of high street bank at the height of the financial crisis a decade ago.
This is the second round of cash handed out by BCR, following awards earlier this year. These three lenders fought off competition from seven other firms to claim these current grants.
Building Society Nationwide said it will use the cash to help launch its business current account in early 2020.
It added it will match the BCR funds with its own over five years, and plans to attract 340,000 small business current accounts customers by March 2024, by encouraging easy switching, transparent fees and use of its 650-plus branch network. The lender said the funds will help create over 200 new jobs.
Investec said it will use the funds to help provide £300m of additional lending to small firms and will “directly support” more than 8,000 small businesses through “lending, deposits and other banking products over the next five years”. The bank said the move will create over 40 new jobs.
The Co-operative Bank said it will commit £17m of its own cash alongside its £15m award to boost its small business banking market share to 5 per cent by 2025 from 2.3 per cent currently.
It added it partner with fintechs to boost its digital services and build a new small business app, allowing firms greater access to their accounts. These plans will create around 270 new jobs, it added.
BCR chairman Godfrey Cromwell said his board looked forward “to these organisations delivering on their public commitments”.
However, the ability of Metro Bank to undertake the commitments it entered into to win its £120m BCR award have come under scrutiny after the bank revealed a £350m black hole in its balance sheet following an accounting error days later.
The funding body said: “BCR will be requiring that awardees produce quarterly updates against their public commitments, which will be made available for public scrutiny”.
Cromwell also told the Treasury Select Committee in March that the BCR has the power to clawback funds it has granted.