RBS should accept independent findings that it systematically treated customers badly, FCA boss says

'We do not agree that the bank's actions caused material financial distress,' bank's boss Ross McEwan said on Tuesday

'The report is strongly critical of RBS, and I think it is frankly unfortunate that RBS has not, in a sense, accepted that more readily,' Mr Bailey told MPs (Reuters)

The boss of the UK’s financial regulator has told MPs that it’s “unfortunate” that RBS has refused to accept the findings of an independent review arguing that the bank is guilty of systemic inappropriate treatment and causing financial distress to customers.

Andrew Bailey said the Financial Conduct Authority would have been quicker to publish a summary of the findings if there had there been a “meeting of minds” between RBS and Promontory, the consultancy firm tasked with investigating the bank’s Global Restructuring Group (GRG).

“The report is strongly critical of RBS, and I think it is frankly unfortunate that RBS has not, in a sense, accepted that more readily,” he told the Commons Treasury Select Committee on Tuesday.

“I think they should do, because a lot of time and a lot of effort and a lot of work has been done on this.”

RBS chief executive Ross McEwan has rejected a number of the criticisms made of the bank in the review, which has not been published.

In a letter to committee chair Nicky Morgan, published on Tuesday, he said that the report could “result in misleading conclusions likely to be misunderstood as suggesting that the bank was guilty of serious conduct failings and that these led to poor outcomes for customers”.

“We do not agree that the bank’s actions caused material financial distress” in the cases identified by Promontory, Mr McEwan said.

“In addition, we do not accept that there was any causal link between the actions of the bank and the insolvency of any of those businesses.”

Ms Morgan said on Tuesday that all MPs on the Treasury Select Committee had constituents who had been affected by RBS’s malpractice.

“Some have not just lost businesses, but in many cases they have lost their homes, they have lost their mental health, or had mental health issues, or had family breakdowns,” she said.

Many of RBS’s small businesses customers have yet to receive compensation, in some cases a decade after their businesses collapsed thanks to the GRG unit, Ms Morgan said.

In May 2014, the FCA commissioned a review into widespread allegations about the department which was supposed to help turn around struggling small businesses. Hundreds of customers said the bank instead hit their businesses with high fees, pushing many into administration before buying back their assets cheaply.

After pressure from victims and MPs, the FCA last week released in interim summary of GRG’s conduct, almost a year after the regulator had reached its initial conclusions about what happened at the bank between 2008 and 2013.

Ms Morgan said she failed to understand how it had taken the regulator a year to summarise a 300-page document into 39 pages.

“If there was only that one part of the story, I would agree,” Mr Bailey responded. “But the biggest piece of work was that we had to go back to evidence ourselves. There were something like 1.5 million records underpinning [the report].”

Asked what effect the delay had on people’s confidence in the regulator, FCA chairman John Griffith-Jones told the committee that the FCA had a duty to be fair to all people, including those who work for RBS, as well as the victims.

Mr Bailey said that when there is such a large dispute between what the third party who produced the report and the bank, the FCA had to check and be satisfied that the report was accurate.

“We’ve done that and concluded that it does stand up. We subscribe to basic thrust of report.”

He added: “There is a very broad range of views on this, from widespread bad practice up to ... a conspiracy. The report is more in the former camp. Obviously the firm is in a different place.”