Challenger banks - including Monzo and TSB - named in fight for £775 million RBS cash

A tussle to grab funds of £775 million from Royal Bank of Scotland to shake-up the banking sector kicked off today, when authorities said 11 lenders had qualified for the scheme.

They include digital-only upstart Monzo and TSB, still grappling with the fallout from a series of IT failures. RBS is freeing up the cash as part of conditions attached to a £45 billion government bailout during the financial crisis.

There is £350 million to incentivise switching and another £425 million to boost business banking deals.

It is hoped the money will radically improve High Street competition, in particular for small-business customers, who will be encouraged to switch from RBS from February.

Starling, Arbuthnot, Clydesdale, Co-op Bank, Hampden & Co, Metro Bank, Nationwide, Santander and Handelsbanken have also been approved by the Banking Competition Remedies board.

The banks will make offers to SME customers at RBS in February.

BCR chairman Godfrey Cromwell said: “Today’s announcement marks an important milestone for incentivised switching. Customers will be the real decision-makers here.

“We anticipate a further application round in next year’s second-quarter will widen the range of offers still further.”