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Findings of watchdog report into RBS branded a ‘disgrace’

Paloma Kubiak
Written By:
Paloma Kubiak

An influential group of MPs has published the controversial report by the financial regulator detailing its findings of RBS’ mistreatment of small businesses during the financial crisis.

The Treasury Committee has published the final, unredacted report compiled by the Financial Conduct Authority (FCA) detailing RBS’ “endemic” mistreatment of struggling small businesses during the financial crisis through its Global Restructuring Group (GRG) arm.

Following a tug of war between the FCA and the committee over the publication of the 361-page report, it is now officially in the public domain.

Nicky Morgan MP, chair of the committee, said: “The findings in the report are disgraceful. The overarching priority at all levels of GRG was not the health and strength of customers, but the generation of income for RBS, through made-up fees, high interest rates, and the acquisition of equity and property.

“The Committee has not taken the decision to publish lightly. Normally, reports prepared under section 166 are confidential, but there is overwhelming public interest in bringing transparency to what happened at GRG, given the earlier leak of the report, and in ensuring that everyone can see, and know that they are seeing, an authentic and verified copy of Promontory’s original report.

“We have today published the terms of reference for our inquiry into SME finance. We’ll examine what must change to prevent what occurred at GRG from ever happening again, and how to restore confidence among SMEs in banks as a source of finance. I encourage all those with views to submit evidence.”

The chair added that as well as continuing to monitor the FCA’s further investigation into GRG, it will keep a close eye on RBS’ Complaints Process to see if it is providing the “fair and reasonable” compensation that has been promised to mistreated customers.

Background to the report and issues

Around 12,000 SMEs were transferred to RBS’s restructuring arm in the aftermath of the 2008 crisis because of issues such as missed loan payments or breaching the terms of a loan.

GRG no longer exists, but at the time its role was to protect the bank’s capital and to help turn SMEs around.

In January 2014, The FCA commissioned an investigation into the actions of GRG and its treatment of SME customers transferred to it between 2008 and 2013.

The report found inappropriate treatment of SME customers such as poor and misleading communication, placing an undue focus on pricing increases and debt reduction, failure to document or explain the rationale behind decisions and the failure to identify customer complaints and to handle them fairly. But the FCA declined to publish the report, saying it was “prevented by legal requirements for consent” and because it would need to “provide a right of reply to all persons involved in the report”.

However, a copy was leaked last week which was widely shared on social media, prompting the Treasury Committee to use parliamentary privilege to seek publication as there is “overwhelming public interest in bringing transparency to what happened at GRG”.

As such, the FCA was given a 16 February deadline to publish the report but instead, it sent it to the committee for fear of ‘legal reprisals’ in publishing the details, meaning power of publication lay in the hands of the MPs.