FCA review of RBS restructuring group branded “a whitewash”

The FCA has published findings from a review into RBS’s treatment of distressed SME customers transferred to its Global Restructuring Group.

FCA review of RBS restructuring group branded “a whitewash”

In January 2014, the Financial Conduct Authority (FCA) appointed Promontory Financial Group to conduct an independent skilled person review of the treatment of SMEs that had claimed they were pushed into administration by the Global Restructuring Group (GRG) between 2008 and 2013.

Businesses were transferred to the GRG after showing signs of significant financial distress and the point of the division was to explore turnaround and restructuring options. Many RBS customers, however, believed that the group’s practices pushed them into administration.

Promontory, helped by sub-contractor Mazars, provided its final report to the FCA in September 2016 which concluded RBS had placed an undue focus on pricing increases and debt reduction without due consideration to the longer term viability of customers.

However, the report found the bank did not set out to artificially engineer a position to cause or facilitate the transfer of customers to GRG.

The FCA found there was no widespread or systematic inappropriate treatment of customers. However, it did state RBS had failed to do several things including:

  • Support SMEs in a manner consistent with good turnaround practice;
  • Document or explain the rationale behind decisions relating to pricing following transfer to GRG;
  • Adopt adequate procedures concerning the relationship with customers and to ensure fair treatment of customers;
  • Identify customer complaints and handle those complaints fairly.

Andrew Bailey, chief executive of the FCA, said: “Commercial lending activity is largely unregulated in the UK but given the seriousness of the allegations against RBS it was appropriate for us to look at their treatment of SME customers.”

Bailey said that while the most serious allegations were not upheld by the skilled person, the report did identify other concerns about the treatment of SME customers.

He said the FCA will continue to investigate the matters raised in the skilled person’s report and will focus on whether there is a basis for further action within its powers.

The regulator explained how skilled person reports cannot be published, but in this case, given the public interest, it has been granted consent by RBS and Promontory to summarise and publish its interim summary of the review. 

James Hayward, chief executive of RGL Management Limited (RGL), the team representing these SMEs, said: “We have always said that the FCA report will be a whitewash and that now looks to be the case. From what we understand, the FCA has failed to acknowledge the serious and deliberate harm caused to businesses through RBS’ GRG.

“The FCA is making excuses in its interim report as to why it cannot bring the bank to justice, which does nothing to help redress the devastation inflicted on business owners by RBS.”

Hayward said if the FCA cannot, or will not, take action against the bank then RGL is ready to do so.