Firms had 'small chance' of recovery

RBS ‘mistreated’ customers, says bank regulator

RBS Gogarburn

Bank’s GRG division was supposed to help firms in distress

An RBS division which was meant to help companies in trouble instead mistreated many of them, according to a leaked report by the regulator, the Financial Conduct Authority.

Investigators found that the Global Restructuring Group (GRG) imposed “inappropriate action” – such as higher interest charges, or unnecessary added fees – on 92% of “viable” firms.

The GRG unit, which operated between 2005 and its closure in 2013, and peaked with 16,000 clients, was supposed to operate as a recovery unit, stepping in to help companies in distress.

It has been been accused of pushing some companies into bankruptcy so it could pick up their assets more cheaply.

The leaked report found that struggling companies had a small chance of re-emerging in a healthy state, with only one in 10 returning intact to the main RBS bank.

As of the end of 2014, 69% of firms, were still in the successor to GRG, which was supposed to return them to health.

Almost seven out of 10 firms in turnaround remained tied to complex loans organised by the GRG which were often too expensive to leave. Other companies handled by the GRG ended up in administration, liquidation or sold. GRG was more like an “undertaker” than a recovery specialist, according to one BBC source.

The 361 page leaked report also says the bank provided only “narrow compliance” to investigators. RBS insists it co-operated fully with the watchdog. It says it provided investigators with “circa 323 gigabytes of data, comprising more than 15 million physical pages and 270,000 emails.”

The FCA provided a summary of the findings last year but the full report calls for a fundamental review of how RBS handles small business customers in financial distress.

RBS is facing scores of legal actions by former customers and has put aside almost £400m to compensate some of the small business owners alleged to have suffered at the hands of GRG but some campaigners claim that compensation payments could be closer to £2 billion.

An RBS spokesman said it had already acknowledged that “in some areas, in the aftermath of the financial crisis, we could have done better for some customers in GRG … the bank accepts it did not always communicate as well or as clearly as it should have done and also did not always handle customer complaints well.”

Earlier this week, the bank reached an undisclosed out-of-court settlement with businessman Stuart Wall who alleged his property company was forced into bankruptcy after involvement with the GRG. He was suing RBS for between £114m and £669m.

> Britain’s banks are bracing themselves for a new wave of compensation claims likely to be sparked by a £42m advertising campaign urging customers to complain about their payment protection insurance policies.

The campaign by the Financial Conduct Authority is due to launch on 29 August, two years ahead of a deadline for any fresh PPI claims – and is being paid for by 18 of the biggest players in the industry.

The FCA hopes the imposition of the deadline will help the industry draw a line under the scandal. It is by far the UK’s costliest mis-selling scandal, having forced the industry to set aside more than £43nm to handle the claims and pay compensation.

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