CYBG makes SME pledge as Clydesdale owner snubbed by fund

Clydesdale owner will still take part in incentivised switching scheme element of RBS fund. Picture: Emma Mitchell

However, Glasgow-headquartered CYBG, owner of the Clydesdale and Yorkshire banks, which had been competing for a share of the same fund, announced that it had been unsuccessful.

The three challenger banks won a grant worth a combined £280 million from RBS’s capability and innovation fund that forms part of its alternative remedies package.

Metro won the largest share of the first pool of the grant with £120m, followed by digital-only lender Starling with £100m and then £60m for ClearBank, which applied for the grant with partner Tide.

Further grants for other pools of the fund will be awarded later this year.

Noting that it had not received a grant from Pool A of the capability and innovation fund, CYBG, which recently swept up rival Virgin Money, said its remained focused on “competing at scale” in the sector and would “continue with its successful existing SME [small and medium-sized enterprise] growth strategy”.

It added: “CYBG has a strong existing position in the SME banking market and has both the capability and critical mass to scale its SME proposition to offer UK customers a meaningful alternative to the incumbent banks.

“The group will maintain its existing strategic focus on its SME business, continuing to invest in growth and developing new capabilities and propositions for customers.”

CYBG said it would “compete strongly” in the separate incentivised switching scheme and intends to offer an “attractive home” to former Williams & Glyn SME customers “being encouraged” to leave RBS.

RBS’s £775m alternative remedies package is part of conditions attached to its £45 billion UK government bailout at the height of the financial crisis and the cash is being distributed by the Banking Competition Remedies (BCR) body.

The capability and innovation fund – totalling £425m – is aimed at helping bidders develop their current account, lending and payments offerings for business customers.

Craig Donaldson, chief executive of the Metro challenger bank, said the grant would help the group “accelerate our plans to revolutionise banking for SMEs. It will help us bring much needed competition to the underserved SME hotspots in the north, while investing in our digital capabilities and creating new jobs”.

Meanwhile, Starling has pledged to use its grant to create nearly 400 jobs in the UK and to invest £94.8m of its own money to bolster its offering to SME customers.

Godfrey Cromwell, chairman of the Banking Competition Remedies body, said: “These awards seek to increase competition in the business banking market and to improve the financial products and services available to SMEs.”