RBS invites external advisers to investigate SME handling

To say that the Royal Bank of Scotland has had a rough couple years is like saying “London suffered a bit” in the Blitz. The catalogue of fines – and the sectors of banking in which the government-backed bank has accrued them – is beginning to look like a phone book. Remember them?

Way back in early 2013, the FSA, alongside American regulatory bodies, imposed a fine of £390,000,000 on the bank. That was in the Libor scandal.

In November 2014 and again in May this year, the bank picked up fines of £400,000,000 and £430,000,000 for stacking the Foreign Exchange markets.

And this week, the bank has launched what will be the third probe into GRG – their Global Restructuring Group. We’re awaiting the outcome of the second audit, which we’ll get from Promontory Financial Group and Mazars later this year. Promontory and Mazars are the FCA‘s appointees to conduct the investigation into RBS’s small business ‘help’ arm.

Prior to that, RBS appointed the Clifford Chance law firm to look into claims of fraud against GRG. That investigation turned up no evidence of wrongdoing on the bank’s part.

So why, then, with an FCA investigation ongoing, should RBS feel the need to reinvestigate GRG? First, we need to understand what the Global Restructuring Group was created to achieve. And some of the allegations it stands accused of.

What is GRG and what does it do?

One of the best overviews of the complaints into RBS / GRG you can find on Bully Bank. It tells the tale of businesses in financial difficulty turning to the bank for help, only to find their ‘special situations’ worsened by the conduct of the GRG team.

This includes, but isn’t limited to:

  • excessive fees for the privilege of GRG’s ‘help’, adding more pressure to the business’ already fragile bottom line;
  • unacceptable conduct, both before and whilst the firm was under the wings of GRG;
  • firms forced into GRG who may not even have needed help from a ‘turnaround’ unit.

To cut a long story short, businesses who banked with RBS were pointed towards the GRG at some point in time. What the trigger or catalyst was for this manoeuvring by the bank it’s difficult to say.

Yes, many firms were in difficulty when the bank ‘forced’ them over to GRG. But the team stands accused of also sucking money from viable businesses and/or shifting businesses to GRG to take control of that firms assets.

FCA intervene despite commercial finance not technically being on their patch

The upshot is that there have been so many complaints about the handling of their situation by small businesses that the FCA has intervened.

This is all the more unusual as commercial lending is not a regulated area of finance. Even more unusual still is that RBS has called in a second “Skilled Person” to undertake an audit of its own division when it’s already received a clean bill of health in the not-so distant past.

The new investigation will have a broader scope and may well have been opportunistically commissioned on the back of the departure of chairman, Sir Philip Hampton.

Only last week, Sir Hampton revealed his surprise at how fast banking had shifted in recent times. He wasn’t only talking of the £10bn in fines, litigation and repayments that RBS has been culpable for. He was also quite candid in admitting that the shift to mobile banking had caught RBS with their pants down (figuratively speaking).

We’ll have to wait and see what further fines – if applicable – RBS will incur for advising business banking customers incorrectly. The taxpayer will also have to wait for their 80% stake in the bank to be repaid.

Considering that RBS’s costs to date have amassed to £10bn and Ross McEwan, their Chief Executive, believes it will only be four years before the bank’s back to normal, doesn’t that tell you something?

Also, according to Sir Hampton, if it wasn’t for the fines the bank’s incurred, it would have already started to reimburse the taxpayer for the £45.8bn bail-out it received in the midst of the financial crisis.

No wonder the bank is struggling to win back trust. It’s not the fines that it’s picking up that’s totally to blame. It’s the disdain shown towards small businesses in their bid to effortlessly recoup such vast sums that really grinds the gears.

If anyone has a story to tell, you can register and share your story either here or through the above link to Bully-Bank. There’s a whole section of their forum dedicated to RBS/GRG. It’s safe to say, you’re not alone.

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