October 23, 2017 / 4:45 PM / 2 years ago

UPDATE 1-Britain's FCA weighs further action over RBS small business treatment

(Recasts, adds CEO comments, details)

By Huw Jones and Emma Rumney

LONDON, Oct 23 (Reuters) - Britain’s financial watchdog is considering further action against Royal Bank of Scotland (RBS) for its treatment of struggling companies during and after the financial crisis.

The Financial Conduct Authority on Monday published a detailed summary of a report into RBS’s Global Restructuring Group (GRG), after clashing with lawmakers over the disclosure of its full contents.

Customers have accused the GRG of pushing ailing firms into bankruptcy to pick up their assets on the cheap.

The report outlined numerous failings and the FCA said it was investigating further, suggesting a problem that has spawned years of lawsuits and public criticism of RBS from former customers could drag on even longer.

“Far from drawing a line under this affair, today’s report is just the start of the long journey to justice for GRG’s victims,” said a spokesman for the GRG Action Group, which represents more than 500 former RBS business customers.

Some of the bank’s conduct amounted to a systematic failure to manage its customers’ and its own conflicting interests, the report said, in one of the strongest official condemnations yet of RBS’s behaviour.

The report however stopped short of saying RBS had systematically and deliberately pushed companies into bankruptcy, as alleged in a previous report in 2013 and repeated by some former RBS customers in the years since.

The bank focused too heavily on pricing increases and debt reduction to the detriment of customers’ long-term viability, and did not adopt adequate safeguards or procedures to ensure customers were fairly treated, the report continued.

Just 10 percent of the companies placed into the GRG, which handled 12,000 troubled firms between 2007 and 2012, emerged intact and returned to the main RBS bank, the BBC reported in August, citing a leaked copy of the full report.

“RBS has accepted that it did not meet the standards it set for itself which impacted on how it treated some of its SME customers,” FCA Chief Executive Andrew Bailey said on Monday.

“We are investigating the matters arising from the ... Report and are focusing on whether there is any basis for further action within our powers. We cannot comment any further on this,” Bailey said.


RBS welcomed the FCA’s confirmation that the most serious allegations against it had not been upheld, and that the measures it had taken to compensate customers were appropriate.

“There would be nothing better than for us to see the end of this on behalf of our customers and behalf of the bank,” Chief Executive Ross McEwan told reporters by telephone.

A barrister hired by parliament’s Treasury Select Committee, which has pressured the FCA to publish the report, still needs to check the detailed summary is faithful to its full contents.

The FCA said a final version of the detailed summary would be published once the barrister has reported back.

The watchdog has rejected calls from lawmakers to publish the full report. The detailed summary reiterated that the full report has identified other concerns about the treatment of small firms.

Treasury Committee Chairwoman Nicky Morgan said on Monday it had taken the watchdog too long to publish the summary. “When its independent adviser reports back later this week, the Committee will consider whether further steps are required,” Morgan said.

Bailey is due to be questioned on the report by the Treasury Committee on Oct. 31.

Scottish police are also investigating complaints made against RBS in relation to the GRG, British newspapers reported last weekend.

McEwan said the bank would cooperate with investigations by both police and the FCA, but added there was nothing in the report that warranted a police probe. ($1 = 0.7579 pounds) (Reporting by Huw Jones and Emma Rumney; Editing by Jane Merriman and David Holmes)

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