Royal Bank of Scotland PLC’s (LON:RBS) £425mln grant to support banks who lend to small and medium-sized (SME) businesses is expected to benefit Santander even though it is one of Europe’s biggest lenders.
New lenders and politicians have voiced concerns that fund will see Santander become one of the main beneficiaries, allowing it to apply for a grant to support business lending, The Times reported.
To be eligible to apply for a grant, applicants must have assets of less than £350bn in the UK.
Santander has £300bn, sparking speculation that it was set low to allow the Spanish bank to apply.
The £425mln "capability and innovation fund" includes 15 grants that challenger banks and other financial services providers can apply for to increase their business lending capabilities.
The fund is part of an alternative plan to free RBS from its requirement to sell its Williams & Glyn under the conditions of its government bailout in 2008 during the financial crisis.
In July, the European Commission accepted the plan that will see RBS spend £835mln to help boost competition by providing support for challenger banks and funds.
Along with the £425mln grant policy, RBS will provide £275mln worth of "dowries" to challenger banks to help them lure SME customers away from Williams & Glyn. A further £75mln will be made available to cover customers' costs of switching.
Should Santander be successful in applying for a grant, taxpayers would be essentially covering it since RBS is still more than 70% owned by the UK government.