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.”

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
2015 General Election
May2015

Poll of Polls

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

Recruitment Genius: Team Leader

Negotiable: Recruitment Genius: A Team Leader is required to join one of the l...

Recruitment Genius: Chef

Negotiable: Recruitment Genius: A Chef is required to join one of the largest ...

Recruitment Genius: Customer Service Assistant

Negotiable: Recruitment Genius: A Customer Service Assistant is required to jo...

Recruitment Genius: Refrigeration and Air Conditioning Service Engineer

£25000 - £28000 per annum: Recruitment Genius: A successful national service f...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor