FCA releases RBS restructuring unit update: City watchdog plots "more focused investigation" into RBS-GRG

Catherine Neilan
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The FCA has still not published the report more than three years after it was commissioned (Source: Getty)

The Financial Conduct Authority will carry out "a more focused investigation" into Royal Bank of Scotland's treatment of small businesses within the Global Restructuring Group (GRG).

The City watchdog, which today published a summary of its near four-year-old report amid growing pressure for transparency, is considering "whether there is any basis for further action within our powers".

"The FCA has been conducting a general investigation into matters contained in the report which we announced in November 2016. We have now decided to carry out a more focused investigation," the report said.

However, chief executive Andrew Bailey reiterated that the "most serious allegations" had not been upheld.

Other concerns

He added: "While the most serious allegations were not upheld by the Skilled Person, the report did identify other concerns about the treatment of SME customers. RBS has accepted that it did not meet the standards it set for itself which impacted on how it treated some of its SME customers.

“We are investigating the matters arising from the Skilled Person’s Report and are focusing on whether there is any basis for further action within our powers. We cannot comment any further on this."

The report found that more than a third of the 5,900 SME customers transferred to GRG during the review period "were not viable at or around the time of transfer and could be expected to face insolvency or administration regardless of RBS’s actions".

Of those that were viable, around 16 per cent "experienced inappropriate action by RBS which appeared likely to have caused material financial distress".

But in total, 92 per cent of potentially viable businesses that went into GRG had "experienced some inappropriate actions", the report said.

"However, due to the wider economic circumstances of the time, there were seldom clear-cut causal links between Bank actions and particular consequences," the review said.

Commerce vs customers

The review also noted that the unit's "commercial objective had been the strategic focus" above and beyond "fair customer outcomes".

Ross McEwan, chief executive of RBS, said: ​"I am pleased that the regulator has confirmed the findings from last November and that the most serious allegations made against the bank have not been upheld.

“We have acknowledged for some time that mistakes were made and have apologised that we did not always provide the level of service and understanding we should have done for these customers in the aftermath of the financial crisis.

“The regulator has again confirmed that the remediation steps we announced in November to address concerns for customers are appropriate. Any customer who feels they were treated inappropriately whilst in GRG should make use of the complaints process.

The culture, structure and way RBS operates today have all changed fundamentally since the period under review. We have made significant changes to deal with the issues of the past, so that the bank can better support SME customers in financial difficulty whilst also protecting the bank’s capital.”

The report was started almost four years ago but has still not been published in full, despite being subject to a number of leaks and the threat of more to come.

The FCA has come under increased pressure to release its review by the new chair of the influential Treasury select committee Nicky Morgan.

Picking up from her successor Andrew Tyrie, Morgan has demanded the full report after the leak.

Although she was rebuffed, the Loughborough MP and former lawyer then threatened to use parliamentary powers to force the FCA's hand, which has resulted in the summary being released as a compromise.

Morgan has said, however, that she will reserve the right to force full disclosure if she is not satisfied that the summary is sufficiently close to the full report.

Morgan said today:​ “It has taken the FCA too long to publish its summary of the skilled persons’ report, so this is not before time.

Read more: Nicky Morgan: Theresa May must plan for her exit

“The Committee has put in place an arrangement to ensure maximum possible transparency is brought to this issue.

“When its independent adviser reports back later this week, the Committee will consider whether further steps are required.”

A spokesman for the GRG Action Group, that represents more than 500 businesses, said: “Far from drawing a line under this affair, today’s report is just the start of the long journey to justice for GRG’s victims.

"RBS should be forced to relinquish the charges that it has over companies that went in to the GRG so that the victims can receive the compensation they deserve. The bank’s complaints process also fails to address the issue of consequential loss that will have had a major impact on many businesses. A pledge to refund the complex fees charged will never be sufficient for people who had their businesses and livelihoods crushed by GRG. Legal action will inevitably follow.

"It remains our belief that publication of this summary report is insufficient. If anything, today’s findings solidify the case for having the FCA’s report published in full so that the bank’s misdemeanours can be properly scrutinised.”

James Hayward, chief executive of RGL Management - formed in order to sue RBS - said: “We have always said that the FCA report will be a whitewash and that now looks to be the case.

"From what we understand, the FCA has failed to acknowledge the serious and deliberate harm caused to businesses through RBS’ Global Restructuring Group. The FCA is making excuses in its interim report as to why it cannot bring the bank to justice, which does nothing to help redress the devastation inflicted on business owners by RBS.

"If the FCA cannot, or will not, take action against the bank then it is important for distressed businesses and individuals to seek justice in the courts. RGL Management is the only group ready to do so, with expertise, funding and lawyers in place.”

Mike Cherry, national chairman of the Federation of Small Businesses (FSB), added: “The summary states that there was a “systematic” failure to manage the conflicts of interest inherent in the turnaround division. It surely follows that we must be able to see the full report in future in order to see how that “systematic” failure happened and who was responsible. The authors themselves express their preference for a whole version to be made public.

“What really matters now is that GRG victims receive the compensation they’re due. Amid concerning reports about the scope of RBS’ £400 million compensation scheme for those affected, it’s encouraging to hear that we will receive quarterly updates on how the redress process is progressing.

“A decade is too long to wait for justice. We should be putting the victims first. That starts with equipping them with the information they need to achieve compensation.”

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