UPDATE 1-UK watchdog launches review into RBS's small business lending

Fri Jan 17, 2014 4:59am EST

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LONDON Jan 17 (Reuters) - Britain's financial regulator has appointed two outside firms to review part-nationalised Royal Bank of Scotland's treatment of struggling small business customers.

RBS, which is 82-percent owned by the government, has been accused by government adviser Lawrence Tomlinson of pushing struggling small firms into its Global Restructuring Group (GRG) "turnaround" unit, so it could charge higher fees and interest, and take control of their assets.

The Financial Conduct Authority (FCA) said on Friday that consultancy Promontory Financial Group and Mazars, an accounting firm, will conduct the independent review which will be paid for by the bank.

The review will consider allegations of poor practice set out in two reports, and publish its findings in the third quarter.

"The review will also consider whether any poor practices identified are widespread and systematic. If this is the case, the second stage of the review will identify the root cause of these issues and make recommendations to address any shortcomings identified," the FCA said in a statement.

Jon Pain, head of conduct and regulatory affairs at RBS, said that in addition to the FCA's review the bank has commissioned lawfirm Clifford Chance to further investigate loans to business customers.

"Any customer with concerns about their experience with GRG can contact Clifford Chance to have their case examined," Pain said.

The FCA said that while commercial lending is not a regulated activity, if the findings reveal issues which come within the FCA's remit it will consider further regulatory measures.

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