RBS accused of ‘systematic failings’ over treatment of small firms

RBS has put aside money to pay small businesses over mistreatment during the financial crisis. Picture: Philip Toscano/PA Wire

Royal Bank of Scotland has been accused by the City watchdog of 'systematic' failings at its Global Restructuring Group (GRG) which led to the mistreatment of thousands of small business customers.

The Financial Conduct Authority (FCA) has released key findings from a two-year review which has seen RBS put aside £400 million to compensate customers and launch a new complaints system relating to 'complex' fees and dealings with its debt restructuring unit between 2008 and 2013.

The inquiry was carried out by consultancy Promontory Financial Group, which examined 207 cases over a six year period, with RBS providing 1.5 million physical pages and 270 emails worth of data, or around 323 gigabytes, over the course of the review.

The GRG was slated as the bank's turnaround unit for struggling businesses, helping restructure customer debt, but was disbanded in 2014 amid allegations of grievous customer mistreatment.

One of those alleging mistreatment is Norwich architect Andrew Gibbs who said his battle with RBS ruined his business. His firm was put into the GRG unit.

He accused RBS of undermining the intelligence of SME's. He said: 'Message to RBS. Sort it out now and realise we are bright and intelligent and we were and are the bedrock to the UK economy.'

The FCA said: 'The report found that some elements of this inappropriate treatment of customers should also be considered systematic as it resulted from a failure on the part of RBS to fully recognise and manage the conflicts of interest inherent in GRG's twin commercial and turnaround objectives and to put in place the appropriate governance and oversight procedures to ensure that a reasonable balance was struck between the interests of RBS and SME customers.'

RBS has said that as many as 4,000 of the 12,000 customers transferred to the bank's GRG unit between 2008 and 2013 are eligible for compensation.

The review found that the bank's 'inappropriate treatment' of small business customers included poor and in some cases 'misleading' communication, an undue focus on price increases and debt reduction without considering whether it helped businesses in the long term, a failure to handle customer complaints fairly, and a failure to document rationale behind pricing.

Promontory also found that RBS failed to adopt adequate procedures to ensure customers were treated fairly.

While customers transferred to the GRG unit were found to be 'exhibiting clear signs of financial difficulty', the report stopped short of confirming earlier allegations that the bank intentionally pushed businesses towards failure in hopes of picking up their assets on the cheap.

The report said there was 'no evidence' that RBS intended to purchase customer assets through its property arm West Register prior to transferring those customers to the GRG, and said it found no cases where property purchases by West Registrar alone led to financial losses.

But the bank's restructuring unit was found to have mishandled the conflicts of interests in the operation and business model of its property arm.

Contrary to some customer allegations, the report claims RBS did not 'artificially engineer' or use inappropriate reasons, such as their potential value to the bank, to transfer customers to GRG.

The report also found that RBS did not make 'unnecessarily burdensome' requests for information from customers.

The regulator said it is still in the process of reviewing the GRG.

•Was your firm affected by the issues in this article? Email our investigations editor Tom Bristow at tom.bristow@archant.co.uk or call 01603772834