RBS ‘drove businesses to collapse before stripping their assets’

Bank faces FCA inquiry over allegations of 'unscrupulous' treatment of small businesses

Whitehall Editor

Royal Bank of Scotland is facing an inquiry by banking regulators into allegations that it drove firms to collapse in order to buy back their assets at rock-bottom prices.

A report into the bank’s “unscrupulous” treatment of small businesses has been passed to the Financial Conduct Authority by the Department for Business, Innovation and Skills. Last night the FCA said it was examining the allegations made but would not comment further.

The Business Secretary Vince Cable said some of the allegations were “very serious”, adding he was waiting for an “urgent response as to what actions have been taken”.

The development is yet more bad news for the banking industry following revelations of poor governance at the Co-operative Bank, whose former chairman the Rev Paul Flowers has been arrested over the purchase of class A drugs.

Yesterday Martin Wheatley, the chief executive of the FCA, said police could be called in to investigate the Co-op Bank if a review found any evidence of criminal activity.

“There are a number of specifics that we will be looking at which potentially lead to investigations,” he said.

Potentially unethical practices at RBS are all the more embarrassing because they cover a period when the bank was nationalised.

The report was written by the businessman Lawrence Tomlinson, who is entrepreneur in residence at the Department for Business, Innovation and Skills. While he wrote the report on RBS’s treatment of its customers on his own initiative, his views carry considerable weight with the Business Secretary.

The report focuses allegations on the turnaround division at RBS – its Global Restructuring Group (GRG).

The division handles loans classed as being risky and is understood to have the power to scrap loan deals, impose inflated interest rates and charge hefty penalties.

But the report alleges that firms not necessarily in immediate financial distress were “engineered” into GRG, sometimes through small technical breaches of loan terms, such as late filing of minor financial information.

They were then hit with exorbitant rates and fees, which in some cases caused them to collapse, allowing RBS to buy their property and assets on the cheap for the benefit of its West Register property arm.

One business that submitted evidence to Mr Tomlinson said that it paid £256,000 in fees alone while in GRG.

Another said that RBS made it pay an immediate sum of £40,000 to continue borrowing terms with the group.

Mr Tomlinson said he was calling for “immediate action to stop this unscrupulous treatment of businesses”.

The report found a “disproportionately high” number of complaints against RBS, but also found examples of similar practice at other banks.

Another part-nationalised player Lloyds Banking Group is also criticised for concentrating on short-term gain at the expense of its business customers.

RBS said it was “already committed” to an inquiry on how it treats small firms. A spokesman said: “GRG successfully turns around most of the businesses it works with, but in all cases is working with customers at a time of significant stress in their lives. Not all businesses that encounter serious financial trouble can be saved.”

News
Alan Bennett has criticised the “repellent” reality shows which dominate our screens
tvBut he does like Stewart Lee
Life and Style
The Google Doodle celebrating the start of the first day of autumn, 2014.
tech
Arts and Entertainment
Sheridan Smith as Cilla Black and Ed Stoppard as her manager Brian Epstein
tvCilla Episode 2 review: Grit under the glamour in part two of biopic series starring Sheridan Smith
Sport
David Moyes and Louis van Gaal
football
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn unforgettable anthology of contemporary reportage
News
i100
Life and Style
Vote with your wallet: the app can help shoppers feel more informed about items on sale
lifeNew app reveals political leanings of food companies
News
Former Governor of Alaska Sarah Palin, left, with her daughter, Bristol
newsShe's 'proud' of eldest daughter, who 'punched host in the face'
Sport
New Zealand fly-half Aaron Cruden pictured in The Zookeeper's Son on a late-night drinking session
rugby
Arts and Entertainment
Salmond told a Scottish television chat show in 2001that he would also sit in front of a mirror and say things like,
tvCelebrity Trekkies from Alex Salmond to Barack Obama
Life and Style
Carol O'Brien, whose son Rob suffered many years of depression
healthOne mother's story of how London charity Maytree helped her son with his depression
Arts and Entertainment
The cover of Dark Side of the Moon
musicCan 'The Endless River' carry on the tradition? See for yourself
Life and Style
food + drink
News
Rob Merrick's Lobby Journalists were playing Ed Balls' Labour Party MPs. The match is an annual event which takes place ahead of the opening of the party conference
newsRob Merrick insistes 'Ed will be hurting much more than me'
News
A cabin crew member photographed the devastation after one flight
news
Voices
A new app has been launched that enables people to have a cuddle from a stranger
voicesMaybe the new app will make it more normal to reach out to strangers
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Pharmaceutical Computer System Validation Specialist

£300 - £350 Per Day: Clearwater People Solutions Ltd: Pharmaceutical Computer ...

High Level Teaching Assistant (HTLA)

£70 - £90 per day: Randstad Education Birmingham: Higher Level Teaching Assist...

Teaching Assistant

£50 - £80 per day: Randstad Education Birmingham: Randstad Education is the UK...

Senior Java Developer - API's / Webservices - XML, XSLT

£400 - £450 Per Day: Clearwater People Solutions Ltd: Our client is currently ...

Day In a Page

Secret politics of the weekly shop

The politics of the weekly shop

New app reveals political leanings of food companies
Beam me up, Scottie!

Beam me up, Scottie!

Celebrity Trekkies from Alex Salmond to Barack Obama
Beware Wet Paint: The ICA's latest ambitious exhibition

Beware Wet Paint

The ICA's latest ambitious exhibition
Pink Floyd have produced some of rock's greatest ever album covers

Pink Floyd have produced some of rock's greatest ever album covers

Can 'The Endless River' carry on the tradition?
Sanctuary for the suicidal

Sanctuary for the suicidal

One mother's story of how London charity Maytree helped her son with his depression
A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits