Banking Competition Remedies (BCR), the independent body established to implement the £775 million Royal Bank of Scotland (RBS) State Aid Alternative Remedies Package (ARP), has confirmed the grant sizes for the Capability and Innovation Fund (CIF) Pool E as well as the process and timeline for applications.

Under Pool E, BCR will be offering £100 million of grant funds to eligible bodies over two application periods. It held a consultation this month to gather views of the size of grants, with 238 organisations contacted directly and over 100 responding.

Responses for Pool D eligible bodies - a total of £20 million available - were consistently in favour of grants in the £2.5 million to £5 million range. Responses from Pool A, B and C eligible bodies - a total of £80 million available - showed larger challengers advocating awards above £20 million and smaller challengers advocating awards £20 million or less.

Taking into consideration these responses, the board decided that Pool E application round one - for Pool D eligible bodies - will consist of to £5 million grants and four £2.5 million grants. The application window opens on 1 June and closes on 26 June with an announcement on winners expected during the week beginning 17 August.

For application round two - with Pool A, B and C eligible bodies - the sizes will be one £35 million, one £25 million and two £10 million grants. The application window opens on 22 June, closes on 31 July and winners are expected to be announced during the week beginning 21 September.

Aidene Walsh, BCR lead director on CIF, said: “We look forward to welcoming a diverse range of applications, across the two funding rounds - the redeployment of £100 million to potential applicants provides a further opportunity to enable greater competition in challenger provision of financial services to UK SMEs – a resilient and vibrant sector that will play a crucial role in Britain’s recovery especially in light of the Coronavirus pandemic.”

However, there was some criticism of the government's perceived support for more incumbent banks than FinTech challengers.

Caroline Plumb, chief executive of cashflow management app Fluidly - one of the Pool D winners - commented: “Since Nationwide and Metro Bank handed back their Pool E awards, the CBIL and BBL schemes to support struggling small businesses through the COVID-19 crisis have demonstrated the government has turned first to legacy incumbents.

"This approach risks compromising the chances of fostering competition and could undermine the stated remit of BCR, which would be a crying shame - instead, we believe smaller allocations should be granted, which if it transpired would lead to greater fragmentation in the market," she continued, adding: "This would only be positive as agile FinTechs have already shown what they can achieve with relatively little."

Earlier this year, Metro Bank and Nationwide returned £50 million each to BCR after their own internal strategic reviews.

Walsh stated: “Despite the difficult circumstances, some challengers have in fact come into their own - the 'younger', more digital companies seem to have adapted to this shift quickly and some are using new technologies to assist SMEs in areas such as lending."

The BRC stated that 13 awardees, across the four pools, were making traction on delivering against their public commitments, despite the challenging economic and business environment. BCR stated that it is now actively engaged in monitoring awardees performance, with regular meetings to discuss delivery and progress towards implementation of their business strategies.

Several awardees have also been very positively engaging with the COVID-19 lending initiatives. Nevertheless, the BCR stated that outside the government schemes there is a low appetite for lending given the substantially increased risk of business failure and bad debt. While short-term targets may be met through these schemes, at this stage long-term lending is posing difficulties for all lenders to SMEs.

"Inevitably some commitments are going to take longer to achieve than originally envisaged and BCR processes allow for revised business cases," read a statement. "Where possible, awardees have been sensibly reprioritising to ensure they continue to build capability that will make a difference to SMEs both now and in the future."

BCR chairman Godfrey Cromwell said: “We have worked quickly to finalise Pool E to ensure that we can deliver the money into the market as soon as possible while abiding scrupulously by the requirements and tasks tightly defined by the ARP agreement.

"We will also retain a robust focus on monitoring and compliance of all funding - there will be further challenges and difficulties along the way - awardees and BCR will work together to address them.”

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