The City watchdog has been accused of abusing legal red tape to delay a report into its controversial decision not to take action against senior individuals within RBS’s rogue unit GRG.
Former business secretary Sir Vince Cable said the Financial Conduct Authority (FCA) is using Maxwellisation – a process whereby individuals criticised in an investigation are given the chance to respond – to “hold up” the publication of the report, which names senior individuals in the unit that has been accused of destroying thousands of small businesses and livelihoods.
Cable told City A.M. that Maxwellisation was becoming “an abuse itself”.
“It is shameful that almost a decade after this happened we’re not even close to publication,” he said.
“It’s totally reasonable that people have a right to reply, but Maxwellisation should be time limited so it is not used as a device for people who want to hold up the truth,” he said.
Last year the watchdog caused widespread dismay when it said it was unable to prosecute senior managers within GRG.
The decision came on the back of an investigation by independent investigators Promontory which found “widespread inappropriate treatment” of customers by the GRG.
In stage two of its investigation, Promontory proposed looking at the “root causes” of the GRG misconduct, such as the influence of external stakeholders, conflicts of interest and reward and incentive structures for GRG.
However, it did not progress to stage two because the FCA said it would proceed straight to enforcement. The regulator then sparked outrage when it said it lacked the powers to discipline RBS – a decision that was branded “disappointing and bewildering” by Treasury Select Committee chair Nicky Morgan.
The FCA has come under renewed criticism for its decision to take stage two of Promontory in house in light of recent allegations that the Treasury had significant control of the GRG through the Asset Protect Scheme (APS), which insured RBS’ toxic loans at the height of the financial crisis.
The allegations emerged in a court case between the bank and Manchester-based businessman Oliver Morley, who claims RBS placed his firm under "economic duress". RBS has said the claim is without merit.
At a Treasury Select Committee hearing in January this year, FCA chief executive Andrew Bailey said Maxwellisation had started. As named individuals are given 21 days to respond, Bailey said that part of the process would be complete by mid-February.
An FCA spokesperson said: “There has been no delay in the publication of our report into GRG.”
Kevin Hollinrake, chair of the parliamentary group for fair business banking, said: “It seems to be excuse after excuse. If Maxwellisation is the reason, then I don’t buy it.
"The fear is that the FCA is running scared of RBS and who was responsible. It seems we have to go to RBS for approval at every stage to get approval for reports. It is very disappointing."