Nationwide Building Society is applying for up to £50 million from a Royal Bank of Scotland bailout fund intended to boost competition in the SME business banking market.
The UK mortgage lender is intending to push into the crowded business banking market after reporting a seven percent drop in annual profits from its core consumer financial services acitivities.
The plans were revealed by CEO Joe Garner during the presentation of Nationwide's interim financial results, in which he also announced a review of the Society's technology strategy and investment programme to meet the growing pressure on financial institutions to deliver more digital-first services.
"Around a million of our members run their own business, and many have asked if we can provide a business account," he says. "The costs of market entry have been prohibitive in the past but thanks to the Alternative Remedies Fund, financed by RBS to boost competition in banking, we are applying for up to £50 million to launch a business current account. If successful, we’ll launch an account targeted at small and micro-businesses, providing a mutual business alternative to the big five banks, who hold 85% of business accounts."
Royal Bank of Scotland was directed by the government and the European Commission to set up two funds worth a combined £775 million following its £45.5 billion bailout during the financial crisis.
The funding has become a source of contention among challenger banks who have complained that the Government has set the bar for applications too low, enabling bigger banks such as Santander, Clydesdale and TSB to be eligible for a piece of the pie.
Godfrey Cromwell, a member of Britain’s upper House of Lords, was appointed this month to lead the body that will approve the hand outs to banks.