One of the last remaining conditions the EU attached to the £45bn rescue of Royal Bank of Scotland has been removed in a step the chancellor said would help to get back taxpayers' money in the bailed out bank.
The Edinburgh-based bank faces a bill of £1.5bn to buy the taxpayer out of a special share which prevented it paying dividends to shareholders other than the government. It was regarded as an impediment to any sell-off of the government's stake.
The EC on Wednesday approved the agreement over the so-called dividend access share (DAS) which was put in place at the time of the taxpayer rescue.
The DAS was regarded as another hurdle to any sell-off of the 81% stake in the Edinburgh-based bank. RBS will pay the Treasury £320m in 2014 and another £1.2bn once it has the resources to do so. There are financial penalties in place if the bank misses payments.
"This is another important step on the road to a more resilient banking system and in dealing with the problems of the past to get taxpayers' money back," the chancellor, George Osborne, said.
When the DAS was in place it was envisaged that RBS would return to profitability in 2011 and potentially start to pay dividends. But the bank did not achieve those goals and RBS made losses of more than £8bn so the removal of the DAS is largely academic.
RBS said, though, that it would give shareholders more confidence in the bank. They must now approve the removal of the DAS at a vote at the bank's annual meeting in June.
Ross McEwan, chief executive of RBS since October, said: "We now need to get on with building an RBS that can earn the trust of our customers and help change UK banking for the better."
The EC, which put in place a number of conditions at the time of the RBS taxpayer rescue, also agreed to extend the deadline for the sale of more than 300 branches it had ordered in return for the government rescue. These branches, codenamed Rainbow, were supposed to be have been sold by October 2013 but the deadline was breached after talks with Santander broke down. They are now being restyled as Williams & Glyn – a brand once used by RBS – and a stock market flotation must be completed by the end of 2016 with the entire branch network sold off by the end of December.
"Part of the government's long term economic plan is to increase competition in the banking sector and so the return of Williams & Glyn to the high street is good news for consumers," said Osborne.
The EU competition commissioner Joaquin Almunia said: "The Commission has agreed to extend the deadline for divesting Rainbow because the UK authorities and RBS have proven their commitment to create and divest Rainbow as a solid standalone bank."
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