UK government proposes new plan to EU for bailed-out bank RBS

The British government on Friday proposed plans for the bailed-out Royal Bank of Scotland to fund initiatives worth £750 million ($932 million, 878 million euros) to improve competition in the sector, in order to meet its rescue conditions.

The bank, 73 percent owned by the government, has made four of the five major divestments demanded by the European Commission in 2009 to address competition concerns following its bailout, but has struggled to offload its final unit, Williams and Glyn, "due to external factors".

Instead, the government has suggested that RBS fund a series of alternative initiatives to satisfy the Commission's requirements, according to a Treasury press release.

These include providing funding for smaller "challenger" banks "to increase their business banking capabilities" and another to lure small and medium-sized enterprises to switch their accounts from RBS to challenger banks.

Other large established banks, such as HSBC, Lloyds, and Barclays, would not be eligible to benefit from the proposal.

"RBS must deliver on its remaining State aid commitments and this new plan represents the most effective way of delivering the pro-competition objectives behind them," said a Treasury spokesman.

"This new plan provides a clear blueprint to increase competition in the UK's business banking market, and would help RBS resolve one of its most significant legacy issues which has held back the sale of the taxpayers' stake."

The estimated upfront cost of the plan to RBS is expected to be around £750 million.

The Edinburgh-based lender was rescued with £45.5 billion of taxpayers' cash at the height of the global financial crisis in the world's biggest banking bailout.