FCA takes no action against bank

City watchdog: we have ‘no powers’ to punish RBS

RBS Gogarburn

Gogarburn HQ: RBS denies mistreating SMEs (pic by Terry Murden)


The Financial Conduct Authority (FCA) today said it will take no action against Royal Bank of Scotland following allegations over its treatment of small business customers.

The City watchdog said its powers to discipline organisations for misconduct do not apply to the activities of the controversial global restructuring group (GRG) which has faced claims that it deliberately forced small businesses to the brink of collapse so it could profit from their demise by selling off their properties. RBS has always denied the claims.

While acknowledging that the behaviour of RBS fell “well short” in its treatment of customers, the FCA said today it would have little hope of imposing sanctions on the bank.

Andrew Bailey, FCA chief executive said: “It is important to recognise that the business of GRG was largely unregulated and the FCA’s powers to take action in such circumstances, even where the mistreatment of customers has been identified and accepted, are very limited.

“Taking action was therefore always going to be difficult and challenging but after carefully considering all the evidence we have concluded that our powers to discipline for misconduct do not apply and that an action in relation to senior management for lack of fitness and propriety would not have reasonable prospects of success. ”

Mr Bailey added: “I appreciate that many GRG customers will be frustrated by this decision but we have explored all the options available to us before arriving at this conclusion.”

“The fact that we can’t take action in no way condones the behaviour of RBS. We expect high standards from the firms we regulate and RBS fell well short in its treatment of GRG customers

“We feel strongly that those companies that have suffered loss as a result of how they were treated whilst in GRG must be appropriately compensated. We are closely monitoring the complaints process overseen by Sir William Blackburne, an independent third party, to ensure that things are put right.”

Sir Howard Davies, RBS Chairman, said: The board welcomes the FCA’s confirmation that it has concluded its investigation into the bank and that no further action will be taken.

“We await the publication of the FCA’s full account and will reflect carefully on its findings to learn any further lessons from what was a hugely challenging time for the bank, its customers and the wider economy.

“The board continues to focus on putting things right for customers through our complaints process and ensuring that past mistakes cannot be repeated. The way the bank deals with business customers in financial difficulty is fundamentally different now.”

The verdict is likely to be seen as a setback for those fighting for a better deal from the bank.

John Colvin, senior associate at law firm Kennedys, has been working on cases linked to the scandal and said this morning: “What we want to see is the FCA has clearly found very serious conduct on behalf of GRG and we want to see a report that is looking forward and is looking at what has gone wrong [and] how that will be avoided in the future.

“We want the FCA not to adopt the light tough that we’ve seen in the past. We want them to step up to the plate in this instance and to consider very carefully the recommendations and how to implement them in the future so this type of behaviour is not repeated in the future.”

RBS set aside £400 million to compensate thousands of small businesses that say they were mistreated by GRG but it has been criticised for the decision to close the scheme to new complaints after revealing it has offered just £10m for direct losses to date. The bank said it has offered £115m in automatic refunds for fees charged by GRG.

The low level of direct compensation was met with a scathing response from the Federation of Small Businesses (FSB). The bank has also been severely criticised by the Westminster’s Treasury select committee and its all-party parliamentary group for fair business banking.

Sir Howard Davies said with the number of complaints continuing to decline, it was the “appropriate” time to give customers notice of its closure.

From the 16,000 firms eligible, RBS said it had received 1,230 complaints as well as a further 165 from customers outside of the scheme’s scope. The rate of complaints has fallen to six per week from a peak of 35 in December 2016, it said.

GRG handled about 12,000 troubled small firms between 2007 and 2012 alone.

Of the complaints it has received, RBS said it had concluded 803 cases, upholding in full or in part just under half of that figure.

Last week it emerged that Scottish police are investigating claims that one former GRG employee solicited bribes for lenient treatment.

The claims are alleged to have taken place between 2014 and 2016, after the period covered by the FCA’s investigation.

The Crown Office and Procurator Fiscal Service (COPFS) said no formal prosecution report had been received, but information provided by Police Scotland was reviewed by the COPFS Serious and Organised Crime Unit.

“Crown Counsel have concluded that there is insufficient evidence of criminal conduct. Should additional evidence come to light that decision may be reviewed.”

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