The boss of TSB has hit out at plans to spare Royal Bank of Scotland (RBS) from selling off its Williams & Glyn network, adding that competition concerns will not be addressed by a £750 million pot of Government money for challenger banks.
Paul Pester told the Press Association that the high street lender is speaking with the Treasury and European Commission as part of a review of the multimillion-pound programme that aims to meet RBS's state aid conditions without selling Williams & Glyn.
He said: "Clearly we've been successful in creating TSB out of Lloyds and creating a new challenger bank.
"If that's not to happen with Williams & Glyn through the creation of an independent bank, what's important is that we still get the same outcome, which is more competition."
The Government says the £750 million will help challenger banks access cash for increasing their business banking operations, and to woo small and medium-sized enterprise (SME) clients to switch accounts from RBS.
Another pot of cash will invest in fintech firms.
However, Mr Pester said one-off funding is not enough to tackle market dominance by Britain's big five banks.
He said: "If RBS takes £750 million and shares it out and just gives it to the challenger banks, what benefit is that?
"Writing us a cheque of £100 million would be very interesting but it ain't going to do much for competition."
RBS - which is still 72% owned by the Government - was required by European Commission rules to hive off the network as a condition of its bailout at the height of the financial crisis in 2008-2009.
Similar conditions applied to Lloyds Banking Group, which resulted in the spin-off of TSB in 2013.
However, RBS was struggling to find a buyer ahead of its deadline - set for the end of 2017 - prompting the Government's alternative funding plan.
A Treasury spokesman said: "RBS must deliver on its remaining state aid commitments and the new plan being consulted on by the European Commission represents the most effective way of delivering the pro-competition objectives behind them.
"It provides a clear blueprint to increase competition in the UK's business banking market, and would help RBS resolve one of its most significant legacy issues which has held back the sale of the taxpayers' stake."
TSB was taken over by Spanish rival Banco de Sabadell in 2015, taking it private just a year after it listed on the London Stock Exchange.
It is now on track to separate itself from Lloyds' IT platform later this year, which has so far added significant costs to TSB's balance sheet and is expected to hurt profits in 2017.
However, Mr Pester assured the migration to a new platform - done with Sabadell's help - would give TSB the chance to stand on its own two feet, regardless of which company is its parent.
TSB is set to pay £100 million more to Lloyds this year for use of the existing IT platform, about £25 million of which is expected to show up as extra costs in next Thursday's first-quarter results.
"You'll see basically the only change is that part of our costs are going up by - not quite a quarter of £100 million, because obviously it's £100 million spread over the year and this is the first quarter. They've slightly front-loaded those costs, so you'll see our costs go up by a chunk which will drive our profitability down.
"Everything else is going exactly as we expect."