Royal Bank of Scotland Group Plc (RBS.L) said on Friday it had proposed abandoning the planned sale of its Williams & Glyn unit after a seven-year struggle to sell the small business lender to meet European Union state aid demands.
The taxpayer-backed bank has instead proposed an alternative series of measures, worth around 750 million pounds ($931.28 million), to help so-called challenger banks and boost competition among lenders.
The new plan includes setting up a fund that challenger banks can access to boost their business banking capabilities, funding the cost of customers switching from RBS to other banks and allowing other lenders to use its branch network.
If the plan is accepted it would end one of the bank's biggest headaches after it was ordered to sell Williams & Glyn as a condition of its state-backed rescue at the height of the financial crisis.
RBS and the UK Treasury have been working on the plan for the last few months after the bank abandoned an idea to build an independent technology platform and to sell it as a stand-alone bank, according to a person with knowledge of the talks.
Ending the bank's state aid commitments is seen as a major milestone in the lender's recovery, returning the bank to full private ownership and restoration of dividends.
The EU commissioner for competition backs the new plan but it now needs the approval of the full European Commission.
The plan would allow the bank to meets its obligations more quickly and with more certainty, RBS Chief Executive Ross McEwan said in a statement.
The bank has provisioned 750 million pounds in its 2016 annual results for the proposal, it added.
European regulators originally ordered a sale of Williams & Glyn by 2013 to prevent RBS, Britain's largest small-business lender, from having an unfair advantage and posing a systemic threat to its economy.
RBS has blamed the complexities of creating a standalone technology platform for the delays in selling Williams & Glyn.
The bank, which is more than 70 percent state-owned, is still in the throes of a restructuring, including asset sales, job cuts and tackling multi-billion dollar charges to settle litigation for past misconduct.
Later this year, RBS is expected to pay the biggest fine in its history to settle claims that it mis-sold mortgage bonds in the run-up to the global financial crisis.