As a result of political pressure, the Royal Bank of Scotland (RBS) must reduce its market share to create better distribution of clients across the UK Business Banking sector. Clients are therefore being asked to ‘switch’ to challenger banks.
Significant financial incentives are being given to these banks for customers that switch to them. A number of challenger banks are passing these incentives on to target clients as reward for switching with the amounts involved, we believe, could be up to £200,000. We understand notifications will be sent out in the new year.
But why are they encouraging customers to switch? During the financial crisis of 2008/9, RBS received financial support from the government, and in return pledged to decrease their own market share, creating a fairer market for other banks.
The £775 million scheme from RBS is designed to boost banking sector competition for small business banking and equip participating banks with the funding to reward customers with offers which they otherwise may not be granted. Some of these banks are prepared to provide customers with day 1 cash for switching.
At present, the Banking Competition Remedies Limited (BCR), the organisation tasked with overseeing the scheme, is reviewing applications made by banks wishing to take part. On December 19th, the BCR is due to publicly announce which banks have qualified for the scheme, and on 25th February, the scheme will then be launched for eligible businesses to take advantage of.
To be eligible to participate in the Business Banking Switch scheme, you must meet the following criteria:
- You must have an existing business account with RBS or NatWest
- You must be a RBS customers in England & Wales or a NatWest customer in Scotland or a NatWest Directs customer
- Your turnover must not surpass £25 million at an individual company level
Once the scheme is launched, customers will be able to review the offers available from participating banks, and choose a suitable offer, applying via RBS. It is important to note that individual banks will also be creating their own offers – which may have additional eligibility criteria.
If you feel at risk of your account being switched or would like support in finding a new funder our Corporate Finance team can help you find the right partner and negotiate the best funding terms and incentive.
If would like any further information regarding the scheme, your eligibility or assistance in switching, please get in touch with Corporate Finance Partner, Darren Hodson.
