The chief executive of NHS Improvement confirmed the U-turn in a letter this morning, after a campaign by the RCN and its members.
The rule, which originally stated that trusts should ensure that staff engaged through an agency are not substantively employed elsewhere, was dropped a day before it was due to come into force.
The RCN had said the rule was unfair, punitive and damaging to high-quality patient care, and it is right to be withdrawn.
The RCN had begun to seek advice on the legality of the change, and members had been advised they were not obliged to join an NHS bank.
“This was an ill-conceived plan by NHS Improvement and today’s U-turn will be welcomed by nursing staff across the country,” said RCN Chief Executive & General Secretary, Janet Davies.
The RCN says that for many NHS nurses, the only way to ensure a decent level of income is to undertake additional work through an agency.
It warned the change could have forced NHS nursing staff into the private sector or see their earnings drop by an average of £1,150 per year from tomorrow.
The RCN has been invited to participate in the drafting of new rules around the use of staffing agencies.