Nationwide returns £50m business bank grant

Nationwide has become the second recipient of Banking Competition Remedies (BCR) fund money to return part of its grant due to not being able to proceed with the business banking plans originally submitted.

Recently Metro Bank, due to changes in its strategy, proposed a revised business case to BCR under which it would continue to deliver part of the original business case while returning £50 million of the funding. This was approved by BCR and this funding is now available for redeployment.

Nationwide has announced that due to the impact of COVID-19, including assumption changes to short and long-term interest rates, the option of entering the business banking market is no longer commercially viable.

Its board has therefore decided not to proceed at this time with its Nationwide for Business proposition and its plans to "turbo charge" that proposition with the £50 million Capability and Innovation Fund (CIF) grant.

BCR has accepted a revised business case from Nationwide in line with the established process in which Nationwide will return, with interest, the full £50 million grant awarded. This further funding will now also be available for redeployment under the CIF scheme.

This means there is £100 million worth of funding to be redeployed. Although the rules under which BCR operates meant that it was unable to seek applications or make the funding available until considerably later in the programme, BCR has now agreed with HM Treasury and Royal Bank of Scotland (RBS) to bring this process forward in order to enable the funds to be deployed to potential applicants in supporting the UK small to medium-sized enterprise (SME) market as soon as is feasible.

By the end of April, BCR will set out the consultation, expression of interest and application processes, eligibility criteria and other relevant information so that applicants can register their interest and start preparing their applications.

BCR stated: “These returns of funds and the further funding round announced today are in line with the design and processes of BCR. Awardees’ businesses evolve in the light of changing circumstances and both Metro and now Nationwide have been very straightforward with BCR about their respective cases.

“This is positive news for the many potential applicants who have already contacted us," continued the statement. "Our awardees are delivering competitive and valuable solutions at a time of great challenges for SMEs and those who serve them. We will deploy these funds, as foreseen in the design of BCR and now accelerated, in further support of innovative ideas to improve competition in financial services to SMEs.”

BCR is the independent body established to implement the £775 million RBS State Aid Alternative Remedies Package.

As for its Incentivised Switching Scheme (ISS), currently SME customers switching banks under it receive a ‘dowry’ payment from the participating body to which they switch. Customers with a turnover of above £1 million receive this money in two tranches, one at switch and one 12 months later.

BCR, with the agreement of the Treasury and RBS, has decided - effective immediately - to waive this requirement. This means that banks that wish to do so can pay across the full dowry at switch and release the retained element of the dowry for those that have switched in the last 12 months.

It is expected that ISS participants that choose to pass on the dowry will be able to do so by 30 April. This waiver will remain in place until the current expiry of ISS in August.

"This step will both enhance the effectiveness of the switching scheme in incentivising customers to switch their accounts from RBS and aid transferred customers in the current period of cashflow challenges," noted the BCR.

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