Thursday 04 April 2019 9:12 am | Updated: Monday 03 June 2019 12:28 am

Co-operative Bank forced to defer plans after missing out on RBS competition fund but submits bid for second round

The Co-operative Bank has been forced to defer plans to expand its business offering after missing out on the first round of the £775m RBS competition fund.

The challenger bank, which has 85,000 SME business accounts, has turned its attention to the second round of grants designed to modernise existing services.

In February, Metro Bank, Starling and ClearBank were awarded a combined £280m as part of the scheme to boost competition.

The Co-operative Bank’s new managing director of SME banking Donald Kerr told City PM the bank was disappointed to miss out and would “defer” a number of plans as a result.

But Kerr said Pool B of the RBS fund – which will see one £50m and two £15m grants awarded – would help the bank focus on “making it easier for customers to do business.”

It would be used to invest in its digital services enabling businesses to check invoices, pay bills and file tax returns through one platform.

The bank’s new internet banking channel will also go live later this month, he said.

Chief executive Andrew Bester said: “Our trusted and recognised ethical brand together with our strong heritage in the SME market gives us a real opportunity to drive deeper competition in the market.

“Investment from Pool B would accelerate our ability to make a difference to small businesses and the communities they serve across the UK.”

The results of Pool A, designed for banks with established business bank offerings, raised a few eyebrows given the inexperience of the winners.

MPs are also mulling an investigation into the process after Metro Bank – awarded the lion’s share – issued an emergency £350m cash call and revealed it was being investigated by regulators just days later.

The Banking Competition Remedies board – ruling over the fund – warned Metro not to “provide misleading information.”