RBS staff were advised by a colleague to “let [small business] customers hang themselves” in the wake of the financial crisis, according to an internal memo published yesterday.
Employees at the bank’s now defunct restructuring unit GRG were encouraged to raise fees to a level that clients “normally cannot afford”, in order to “leaverage [sic] an upside”.
The bank is accused of profiting from the collapse of small business clients, as companies suffered the effects of a severe economic downturn.
The document, entitled Just Hit Budget! and written in 2009, was published at the request of Treasury Select Committee (TSC) chair Nicky Morgan. It reveals how staff were given eight tips including: “Rope: Sometimes you need to let customers hang themselves” and “missed opportunities will mean missed bonuses”.
“The RBS memo makes shocking reading,” said Treasury Select Committee member Stewart Hosie. “It was a step by step guide to fleece RBS customers.”
The memo also refers to some clients as “basket cases: time consuming but remunerative” and suggests that if a certain senior RBS manager – whose name has been redacted – and the client are both unhappy “you probably have the balance right”.
The papers include a 16-page guide called “ways to generate income”. Top of the list is the suggestion that clients, SMEs who had been put into the GRG because of financial troubles, be charged around 10 per cent of the debt owed in the full knowledge they could not usually pay.
It also includes a guide on exit fees – “Consider ratcheting. Useful for property developments” – and margin enhancement – “as per bank matrix unless/until you agree an upside. Claim the margin until all limits formalised”.
In a letter to Morgan as he released the memo, RBS chief executive Ross McEwan distanced the firm as a whole from the document, saying “it was written in 2009 by a junior manager who is no longer employed by the bank.
“At no point did it form part of GRG or RBS policy. In addition, the document was not widely distributed.”
McEwan said the document had been “identified by the bank and brought to the attention of the FCA and the skilled person during the review”.
“For the avoidance of doubt, the language used in the document was completely unacceptable, and the bank does not condone it.”
Morgan told City A.M.:“The material published today underscores the long-held concerns of the Treasury committee about the treatment of SMEs referred to GRG. We will ask [the skilled person] and RBS about this in more detail when they appear before the committee on 30 January.”
RBS-GRG will be the subject of a parliamentary debate tomorrow, following a request last year by Labour MP Clive Lewis, to highlight the treatment of small firms that were placed into GRG.
The unit has already faced at least four separate investigations by different bodies.
In October, FCA boss Andrew Bailey confirmed another “more focused” investigation had begun as it published a summary of a long-withheld skilled person’s report.
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”.
However, 92 per cent of potentially viable businesses that went into GRG had “experienced some inappropriate actions”, while around 16 per cent “experienced inappropriate action by RBS which appeared likely to have caused material financial distress”.
A spokesman for the GRG Action Group, which represents more than 500 affected businesses, said the memo “provides an alarming insight into the culture at RBS that led to the harrowing treatment of GRG customers”.
He added: “The need to generate fees at all costs pushed staff to deploy devious tactics designed to cause maximum financial hardship to clients. Ross McEwan’s attempt to blame this on a “junior manager” is wholly unconvincing – it was a cultural issue and culture comes from the top.
“Not three months ago, Ross McEwan claimed any allegations of wrongdoing by RBS were attempts at ‘bad mouthing’ – today’s revelations make a mockery of that claim.
“If our call for the full publication of the FCA’s report has ever been more warranted, it is now. The evidence is clear: we need to see the full extent of what the victims were put through.”