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Treasury Committee publishes full report into RBS’ “disgraceful” restructuring unit

The Treasury Committee has published the full report on Royal Bank of Scotland’s (RBS) treatment of SME customers within its Global Restructuring Group (GRG).

The Treasury Committee had called on the Financial Conduct Authority (FCA) to publish the report earlier this month. However, the FCA was not able to obtain consent from all individuals involved and was therefore ordered to send the report to the Treasury Committee instead.

 

In January 2014, the FCA appointed the consultancy Promontory Financial Group to conduct an independent skilled person review of the treatment of SMEs that had claimed they were pushed into administration by the GRG between 2008 and 2013.

 

Businesses were transferred to the GRG after showing signs of significant financial distress and the point of the division was to explore turnaround and restructuring options. Many RBS customers, however, believed that the group’s practices pushed them into administration.

 

Chair of the Treasury Committee, Nicky Morgan MP, 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.”

 

Morgan said the Committee will now 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.

 

She added: “As well as continuing to monitor the FCA’s further investigation into GRG, we’ll keep a close eye on RBS’ complaints process to determine whether it is providing the fair and reasonable compensation that has been promised to mistreated customers. Any person referred to in the report is invited to make any observations to the Committee."

 

An FCA spokesperson said: “The FCA fully supports the Treasury Committee and the Business, Energy and Industrial Strategy Committee inquiries into the issues facing SMEs. The FCA feels that it is important for everyone, including financial services firms, that there is an effective dispute resolution mechanism for businesses.”

 

An RBS spokesperson said: “We are deeply sorry that customers did not receive the experience they should have done while in GRG. The report makes for very difficult reading and some of the language used by our staff in the past was clearly unacceptable.

 

“Although the most serious allegation – that we deliberately targeted otherwise viable businesses in order to distress and asset-strip them for the bank’s profit – has been shown to be without foundation, we know that the bank got a lot wrong in how it treated some customers in GRG during the financial crisis.

 

“That is why we put in place two steps – a complaints process overseen by retired High Court Judge, Sir William Blackburne, and an automatic refund of complex fees – to put things right. Any in-scope customer who feels they were treated inappropriately whilst in GRG should make use of the complaints process which the FCA agree is an appropriate response to the findings.

 

“The culture, structure and way RBS operates today have all changed fundamentally since the period under review and we have made significant changes to deal with the issues of the past, including how we treat customers in financial distress. We have accepted all the relevant recommendations from the report and our focus is now on rebuilding trust and supporting our customers.”

 

Speaking on management responsibility at RBS, the spokesperson said: “The FCA is conducting a second stage of its review, which includes looking at what management knew, or should have known. It would be inappropriate for the bank to comment until the FCA has concluded its investigation.”

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