City regulator criticised after RBS investigation is pushed back

MP questions delays in report on treatment of bank’s business customers

Andrew Tyrie: ‘The longer the delay, the longer small firms may have to wait for compensation’ (Rex)

The Treasury Select Committee chairman Andrew Tyrie has fired a shot across the City watchdog’s bows after it said the results of an investigation into Royal Bank of Scotland’s treatment of business customers won’t be known until next year.

The Financial Conduct Authority (FCA) commissioned the accountants Mazars and consultants the Promontory Financial Group to carry out the report on RBS’s since-disbanded Global Reconstruction Group (GRG), in the wake of accusations that it had forced viable businesses to the wall to make profits for the bank.

The work had been due for completion by the end of this year, but has now been pushed back to an unspecified future date. The FCA gave no reason.

Mr Tyrie said of the announcement: “Those affected will find this disappointing. The longer the delay, the longer that small firms – possibly forced out of business by GRG – may have to wait to receive compensation. This is because RBS will only take a decision on a possible redress scheme after the regulator’s report is published.

“The [Treasury] Committee will want to examine the report carefully, when it finally appears,” he added.

Mr Tyrie was sharply critical of the delays in the recent report on the failure of the banking group HBOS – and of the regulator’s culture.

FCA chiefs are all but certain to be called before the committee to answer questions on the work, known as a Section 166 report.

More than 250 business owners are keenly awaiting the outcome amid hopes that RBS could be forced to institute a redress scheme. Lawyers are also circling with potential legal claims against the bank.

The activities of GRG first came to public prominence in 2013 after the businessman Lawrence Tomlinson released a report claiming financially strained business customers had been forced into the arms of GRG in an attempt to make money for the bank.

Another report by Sir Andrew Large, commissioned by the bank, criticised its handling of small business customers. However, the legal firm Clifford Chance found no evidence that the bank was culpable of “systematic and institutional” misbehaviour in putting otherwise viable businesses into distress artificially. It did, however, criticise some of GRG’s practices after it was drafted in by the bank to consider Mr Tomlinson’s central allegation.

When it set up its review, the FCA said it would consider a wider range of allegations made in the Tomlinson report. It also said it would “consider whether further regulatory measures are required in relation to any issues falling within our remit”.

The commercial loans business was not regulated by the FCA during the time in question.

However, watchdogs have successfully brought actions against City banks over foreign exchange rigging and attempts to fix Libor interest rates. Neither of these areas were regulated activities when the activities uncovered by investigators were carried out.

In its statement, the FCA said: “The work is ongoing and good progress has been made, and all parties remain keen to complete this complex review quickly. An announcement will be made as soon as possible in 2016.”