RBS has received the go-ahead of the European Commission (EC) for its proposed alternative remedies package regarding its state aid commitments.

The British lender was required to offload its Williams & Glyn (W&G) business as one of the conditions for the £45.5bn bailout by the UK Government following the banking crisis.

The alternative plan replaces this requirement and eliminates the need to achieve separation of the W&G division by 31 December 2017.

Instead, RBS will now set up a £425m Capability & Innovation Fund, managed by an independent body, to support competitors in the UK banking and fintech sectors.

The alternative plan also includes an incentivised switching scheme that will fund eligible challengers to allow them to offer incentives to RBS’s SME customers.

EU expects the alternative package to boost competition in the UK SME banking market.

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RBS CEO Ross McEwan said: “We are pleased that we now have final approval from the European Commission for the Alternative Remedies Package. This allows us to resolve our final State Aid divestment obligation and brings welcome clarity for our customers and staff.”