Eleven lenders vie for a slice of £775m Royal Bank of Scotland competition fund

The banks will be entitled to a share of a £350m incentivised switching scheme aimed at encouraging small business customers to ditch their RBS account for rivals.

RBS is freeing up the cash as part of conditions attached to its £45bn Government bailout at the height of the financial crisis, and the money is being distributed by the Banking Competition Remedies body.

As well as Monzo and Starling, Arbuthnot, Clydesdale, Co-op Bank, Hampden & Co, Metro Bank, Nationwide, Santander, Handelsbanken and TSB have also been approved.

They will make offers to SME customers at RBS in February.

A further four unnamed firms, which are not currently members of the current account switching service, were also approved and the BCR is considering a second application window in late spring 2019.

BCR chairman Godfrey Cromwell said “It’s very good news that a broad selection of organisations have stepped forward and made a diversity of offers right across the SME client base. Today’s announcement marks an important milestone for incentivised switching.

“Customers will be the real decision-makers here. We look forward to getting through the contracting stage and seeing these offers made public so that customers can react.

“We anticipate that a further application round in quarter two 2019 will widen the range of offers still further.”

Bidding for participation in a separate £425 million Capability and Innovation Fund - aimed at helping banks develop their current account, lending and payments offerings for business customers - is also under way.

While the process has been marred by delays - having been put nearly six months behind schedule earlier this year - directors insist the BCR is now on track to deliver the distribution of the fund along a stringent timeline.