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The European Union has accepted a $1.1 billion proposal from the U.K. to settle outstanding issues tied to the Royal Bank of Scotland PLC's (RBS) - Get Royal Bank of Scotland Group Plc Report bailout, saving the state-owned bank from having to sell over 300 branches to meet the bailout's obligations. 

The U.K. will spend about 835 million pounds to help smaller challenger banks and improve competition, Reuters reported. 

RBS received a 45 billion pound bailout during the global financial downturn with the condition that it streamline its operations. 

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"It will see RBS fund and deliver a package of measures to improve the UK business banking market and is designed to boost competition, helping small and medium-sized enterprises benefit from greater choice and offers on banking services," the U.K. finance ministry said in a statement. 

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