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TSB to bid for £833m RBS fund despite IT meltdown

TSB has made a string of senior hires and invested millions in its business bank - Getty Images Europe
TSB has made a string of senior hires and invested millions in its business bank - Getty Images Europe

TSB is gearing up to bid for an £833m competition fund stumped up by rival Royal Bank of Scotland to fund a relaunch of its business bank, despite suffering a high profile IT meltdown earlier this year.

The challenger bank wants to grab a big chunk of the funding pot and invest millions in its business services ahead of a relaunch by the end of the year.

Competition regulators have forced RBS to carve out the funding as the price of keeping subsidiary Williams & Glyn.

Brussels originally demanded that RBS spin out 300 branches because the bank received a £45bn bailout during the financial crisis, but the plan proved too much of a logistical challenge. 

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An independent panel chaired by former Barclays banker Lord Godfrey Cromwell will hear the bids in November.

Rivals including Metro Bank, Clydesdale and controversially Spanish giant Santander - which is many times the size of its eligible rivals - have also set their sights on the cash.

RBS - Credit: © Luke MacGregor / Reuters
RBS is stumping up an £833m fund to boost competition in business banking Credit: © Luke MacGregor / Reuters

Privately bank bosses have played down TSB’s chances due to its IT fiasco earlier this year.

The outage knocked out online banking systems, led to more than 1,300 customers becoming victims of fraud, and cost the job of chief executive Paul Pester earlier this month.

Undeterred by the fallout, TSB has ploughed cash into its business banking services and today announced a string of senior hires.

The service will be run by SME banking director Richard Davies, who joined from a senior role at rival HSBC’s business bank earlier this year.

Eight of the top 11 roles in its business bank will be held by women, which Mr Davies described as the most “diverse leadership team in SME banking”.

The new recruits include ex-Barclays bosses Charisma Borkakoty and Genevieve Kangurs and former senior HSBC banker Niv Subramanian.

Former TSB chief executive Paul Pester - Credit: Nick Ansell/PA Wire
A high profile IT meltdown forced chief executive Paul Pester to step down earlier this month Credit: Nick Ansell/PA Wire

TSB’s chairman Richard Meddings made business banking a top priority for TSB after taking over executive responsibilities from Mr Pester this month.

Separately, it emerged rivals HSBC and RBS are stepping up their efforts to grow their business banking units.

HSBC increased its target for lending to small businesses this year to £12bn, up from £10bn in 2017.

The move comes as chief executive John Flint targets aggressive expansion in the UK, despite a strategic shift towards its biggest market Asia in recent years.

HSBC said its so-called ‘SME Fund’ would include a ring-fenced £1bn to help UK companies boost exports.

Meanwhile RBS is trialing two standalone digital banks under its NatWest brand, one of which will be targeted at small business banking.

The business banking project is being overseen by commercial and private banking chief Alison Rose, who has been tipped as a potential successor to current chief executive Ross McEwan.

Established lenders are targeting growth in business banking at a time of increasing competition from online start-ups and peer-to-peer lenders.

Yesterday it emerged online lender ThinCats had secured an additional £300m funding agreement with asset management backer Insight Investment, part of BNY Mellon, taking its total funding pot to £600m.

ThinCats lends to small companies between £100,000 and £10m.