Royal Bank of Scotland has confirmed the EU is exploring “alternative” ways in which the lender can meet the bloc’s state aid rules following its stuttering progress on selling branches under its Williams & Glyn brand.

The FT reported on Friday that the taxpayer-owned bank was close to being freed of its EU requirement to create a challenger bank for small businesses and sell around 306 Williams & Glyn branches after a deal with Brussels to spend £750m on ways to boost competition.

In a statement on Monday, RBS said Margrethe Vestager, EU competition commissioner, would begin to gather evidence looking at alternatives for the lender.

It added:

If adopted, this alternative plan would replace the existing requirement to achieve separation and divestment by 31 December 2017 of the business previously described as Williams & Glyn.

As previously disclosed, none of the proposals to acquire the business received by RBS can deliver a full separation and divestment before the 31 December 2017 deadline.

Chief executive Ross McEwan said:

Today’s proposal would provide a path to increased competition in the SME market place. If agreed it would deliver an outcome on our EC State Aid divestment obligations more quickly and with more certainty than undertaking a difficult and complex sale and would provide much needed certainty for customers and staff.

The British government owns 72 per cent of RBS, with the lender also confirming that it would take a subsequent £750m provision in its full-year 2016 results which are due on Friday.

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