RBS denies corporate 'turnaround' unit was used as a profit centre

Tue Jun 17, 2014 12:19pm EDT

* Sach says division didn't contribute to bank's profits

* Lawmaker Tyrie says RBS has contradicted Large report

LONDON, June 17 (Reuters) - Royal Bank of Scotland's 'turnaround' unit was not used to make a profit out of small businesses struggling to survive, the head of the division told lawmakers on Tuesday.

Derek Sach, the head of GRG, told parliament's Treasury Select Committee, that the division had made a loss of 2.1 billion pounds from its dealings with small- to medium-size enterprises (SMEs) between 2008 and 2013.

"It doesn't contribute to the bank's profits at all. Our main objective is to restore the customer's health and strength. It runs at a loss," he told the committee, which oversees the work of Britain's finance ministry.

Andrew Large, who was commissioned by RBS last year to review its lending to small businesses, had said the bank's Global Restructuring Group (GRG) was being used as an "internal profit centre" and government advisor Lawrence Tomlinson claimed small businesses were pushed into the unit so RBS could charge higher fees and take control of their assets.

Conservative lawmaker Andrew Tyrie, who chairs the Treasury Select Committee, said he would write to Large for his view on the inconsistency between Sach's assertion and the findings of his report.

"RBS has flatly contradicted an important conclusion, and concern, of Andrew Large's report," Tyrie said following the evidence session.

An independent review by law firm Clifford Chance in April found no evidence that RBS had set out to defraud small businesses. But the division's activities are still the subject of a review by Britain's financial regulator. ($1=0.5956 British pounds) (Reporting by Matt Scuffham; Editing by Greg Mahlich)

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