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RBS to set up compensation fund for small businesses www.theguardian.com
Royal Bank of Scotland is to set up a compensation fund for small business customers who claim they were badly treated by the bailed-out bank, in an attempt to draw a line under the long-running scandal.
The bank, 73% owned by the taxpayer, has repeatedly defended itself against persistent claims from small businesses that they were deliberately pushed to the brink of collapse to enable it to make a profit.
Its chief executive Ross McEwan, who has previously admitted that RBS let some small businesses down, is now preparing to announce a scheme to pay redress to customers in its global restructuring group – known as GRG and since disbanded.
The bank would not comment on Monday amid expectations that announcement would be made before the stock market opened on Tuesday. There were reports that the sum being offered in compensation would amount to around £300m.
McEwan, a New Zealander who has been running RBS for three years, is again expected to insist the bank has not seen evidence to support claims that it forced viable business to fail. The bank has in the past said: “In the aftermath of the financial crisis we did not always meet our own high standards and we let some of our SME customers down.”
But the creation of a scheme to compensate some customers is likely to be seized upon by small business customers as an admission it made some mistakes – although RGL Management, formed to gather claims against the bank, has been saying since April it intends to lodge legal claims worth more than £1bn against the bailed-out bank on behalf of small business customers.
As recently as last month, when RBS reported its results for the first nine months of the year, campaign groups set up by small businesses were angered at its refusal to set aside any money to pay compensation for them.
The announcement coincides with an appearance by Andrew Bailey, the new chief executive of the Financial Conduct Authority, at the Treasury select committee of MPs which has taken evidence from current and former RBS executives about the allegations.
A report commissioned by the FCA into the conduct of the GRG division has been much delayed, and is now expected to be published by the end of the year. Bailey is likely to face questions about this during Tuesday’s hearing, which will be chaired by Conservative MP Andrew Tyrie.
The allegations surfaced in 2013 when Lawrence Tomlinson, a businessman who was an advisor to the then business secretary Sir Vince Cable, compiled a dossier of allegations that RBS was deliberately wrecking small businesses to make profits for the bailed-out bank. At the time Tomlinson said he been approached by businesses which had ended up in GRG and had their properties sold to the bank’s specialist property arm, West Register.
It prompted RBS to commission a report from law firm Clifford Chance which “found no evidence that the bank ‘low-balled’ bids to customers in the hope or expectation of acquiring properties at a low price”.
But the law firm did say that “both in relation to the handover process and the restructuring process more generally, some [RBS] customers complained that they experienced insensitive, rude or aggressive behaviour.”
Clifford Chance explicitly criticised the bank for a lack of transparency on fees.
But the claims of mistreatment by small businesses have refused to die down and delays to the official FCA report have fuelled anger from business people who claim they have lost their livelihoods.
The report was first expected in December 2015, delayed to April 2016 and then in October the FCA said it had received the final report from the so-called skilled person, the firms Promontory Financial Group and Mazars.
“There are a number of steps for the FCA to complete before we are in a position to share our final findings, which will include an assessment of all relevant material, of which the skilled person’s report is one. This has been a complex and lengthy review – it is therefore important that we do not rush the final stages of this process,” the FCA said in October.
RBS is battling to put a long list of so-called conduct issues behind it. It also faces a bill from the Department of Justice in the US for the way it sold mortgage bonds a decade ago. Some analysts reckon this could amount to £9bn.
Chancellor Philip Hammond has also abandoned any attempts, for now, to sell off any more of taxpayers’ remaining 73% stake in the bank after an initial 5% shareholding was sold in August 2015.
Published Date:2016-11-08
