Bullying tactics: RBS managers’ behaviour was described as ‘inappropriate’
MPs have defied the City regulator and released a report declaring that RBS mistreated thousands of small firms.
The report by the Financial Conduct Authority reveals damning evidence against the actions of the bank’s Global Restructuring Group (GRG) which was set up to help businesses in difficulties.
Commissioned by the FCA in 2014 after allegations by former RBS clients, the 350-page document details “widespread inappropriate treatment” of small businesses by the GRG, resulting in “material financial distress”.
The FCA had refused to publish the full report and had instead distributed a summary version to MPs, even though it was already widely available.
But the Treasury Select Committee agreed to publish the report and chairman Nicky Morgan described its findings as “disgraceful”.
RBS said it was “deeply sorry” for its treatment of businesses in the GRG.
Ms Morgan said MPs had not taken the decision to publish lightly, but said there was an “overwhelming” public interest in its publication.
She 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 GRG operated from 2005 to 2013 and at its peak handled 16,000 companies.
Companies were referred to it when they skipped a loan repayment or suffered a significant drop in sales or profits.
The report estimated that about a third of firms transferred to GRG were not viable. Of those that may have been able to continue trading, the FCA found that one in six had suffered damage as a result of action by the GRG.
“Our central conclusions are that there was widespread inappropriate treatment of customers by GRG,” the report said.
It blamed “fundamental failings” in the management of the unit.
In particular, it says GRG put its own commercial interests ahead of the small and medium-sized firms it was supposed to be helping.
Small business owners complained of intimidation and bullying tactics.
An RBS spokesperson said: “We are deeply sorry that customers did not receive the experience they should have done while in GRG.
“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.
“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.”
Federation of Small Businesses chairman Mike Cherry said the GRG scandal had made firms wary of applying for bank loans and called on the Treasury committee to reassure them this situation will not be repeated.
What the report said:
- A memo advised GRG staff “how to get a customer to agree chunky fees and upsides and thank you for it”.
- Another note said: “Sometimes you need to let customers hang themselves. You have then gained their trust and they know what’s coming when they fail to deliver.”
- One warning to staff said: ‘Missed opportunities will mean missed bonuses.”
- Businesses in severe distress were referred to as: “Basket cases: Time consuming but remunerative.”
- On fees to be charged, staff were told: “Be specific: avoid round number fees – £5,300 sounds as if you have thought about it. £5k sounds like you haven’t.”