The latest charges being levelled at Royal Bank of Scotland are as concerning as any in its chequered recent history.
The report from Sir Andrew Large on the bank’s small-business lending would, in normal circumstances, be worry enough for newly installed chief executive Ross McEwan. Smaller companies have long complained that, despite the bank’s protestations to the contrary, they cannot get the loans they need. Now, an independent review confirms that much of the criticism is justified and the taxpayer-rescued institution must explain why it has not been doing all it could and should to assist Britain’s economic recovery.
These are not normal circumstances, however; and Mr McEwan has even greater troubles to contend with. According to a second document, this one from Lawrence Tomlinson – successful businessman and “entrepreneur in residence” at the Department for Business – RBS may have sunk to even greater depths in its cavalier treatment of Britain’s small companies. Not only has the bank allegedly been shunting perfectly viable companies into its high-risk (and high-fee) Global Restructuring Group, the West Register property division is then picking up their assets on the cheap.
Both reports must, of course, be put in context. In the years running up to 2008, RBS was recklessly over-extended, providing loans to many businesses that did not justify the confidence. Now, as the bank struggles to repair its balance sheet, bad debts must be written off, so-called “zombie companies” propped up by undeservedly cheap loans put out of their misery, and lending practices tightened.
Mr Tomlinson’s inquiries suggest something altogether more serious, however. The investigation left him “really sick” at times, he says – feelings shared by many now that the findings are in the public domain. Vince Cable has, rightly, sent the evidence to City regulators. Mr McEwan, meanwhile, has called in the law firm Clifford Chance to conduct an internal review. Such sharp practices would be inexcusable from any bank; from one that is, to all intents and purposes, owned by the state, they are doubly so.