MPs have published a damning report into “disgraceful” mistreatment of thousands of struggling small firms by Royal Bank of Scotland in the years following the financial crisis.
The 360-page document details “widespread inappropriate treatment” of customers by the bank’s disgraced Global Restructuring Group - a unit which was meant to help businesses experiencing financial difficulty.
One in six of the businesses examined at experienced “material financial distress” as a result of GRG’s mistreatment, the report, which was authored by consultancy firm Promontory, found.
The FCA had received the report in September 2016 but refused to publish it. MPs voted on Tuesday to use parliamentary privilege to do so.
Nicky Morgan, chair of the Treasury Committee, said the report’s findings were “disgraceful”.
“The overarching priority at all levels of GRG was not the health and strength of customers, but the generation of income for RBS, through made-up fees, high interest rates, and the acquisition of equity and property. The committee has not taken the decision to publish lightly,” Ms Morgan said.
Normally, reports that are prepared when the FCA orders a third party to investigate a company’s conduct - known as section 166 reviews - are confidential, but Ms Morgan said there was “overwhelming” public interest in bringing transparency to this case.
She added: “We have today published the terms of reference for our inquiry into SME finance. We'll examine what must change to prevent what occurred at GRG from ever happening again, and how to restore confidence among SMEs in banks as a source of finance. I encourage all those with views to submit evidence.”
The committee will be keeping a “close eye” on how RBS deals with complaints to ensure that those affected receive fair and reasonable compensation, Ms Morgan said.
Robin Henry, a partner at law firm Collyer Bristow, said the most striking conclusion in the report was that inappropriate behaviour was systematic.
"Such behaviour, contrary to the law, regulations and RBS’ own policies, was not the result of rogue employees but something that GRG management was or should have been aware of," Mr Henry said.
"There was an intentional and coordinated strategy to focus on GRG’s commercial objectives rather than on the interests of its customers.”
He also criticised the FCA for not carrying out the second phase of its investigation.
He said: “A[nother] major failing revealed by the report’s publication is that the FCA has not followed up on its conclusions since it was completed in September 2016.
"The report was supposed to be Phase 1 of the investigation into GRG, and Phase 2 was for the FCA to consider the root cause of the problems and whether RBS management knew or sanctioned GRG’s misconduct.
"Nearly 18 months later, the FCA has provided no answers to these questions, and this is something it must now address as a matter of urgency.”
A spokesperson for RBS said the bank was “deeply sorry” about GRG’s treatment of customers.
The spokesperson added: “The report makes for very difficult reading and some of the language used by our staff in the past was clearly unacceptable.
“Although the most serious allegation - that we deliberately targeted otherwise viable businesses in order to distress and asset-strip them for the bank's profit - has been shown to be without foundation, we know that the bank got a lot wrong in how it treated some customers in GRG during the financial crisis.
RBS said it’s culture, structure and operations had now fundamentally changed.
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