There is a fundamental cultural problem with the Royal Bank of Scotland’s lending to and treatment of small businesses and the remedy must force “big cultural change”, Treasury Select Committee chairman Andrew Tyrie said.
This follows the news that City regulators have been handed a damning dossier of evidence compiled by an adviser to Vince Cable, secretary of state for business, innovation and skills, which claims that RBS was deliberately wrecking viable small businesses to make profits for the bailed out bank.
According to reports, Mr Cable said some of the allegations were so serious that he had handed the report, compiled by businessman Lawrence Tomlinson, to the regulators and the bank. It has also been given to Sir Andrew Large, a former deputy governor of the Bank of England.
FTAdviser sister title the Financial Times has reported this morning that former Conservative chancellor Lord Lawson and a number of other senior peers, alongside parliamentary banking commission member and Archbishop of Canterbury Justin Welby, are demanding changes to the reform package in the wake of the revelations and other recent scandals.
The peers are calling for the reforms to include a requirement for senior bankers to be required to hold licences, which was recommended by the banking commission but not implemented as part of the proposals.
They are also said to be set to demand tough new sanctions for any bank seen to be undermining the banking ‘ringfence’ separating high street lending activities from investment banking.
Andrew Tyrie, chairman of the TSC, said of the RBS reports: “This is unwelcome but not wholly surprising. It confirms what my Parliamentary colleagues and I have been hearing for a number of years and which was, at various times, vigorously rebutted by RBS.
“The actions and reputation of RBS have discouraged would-be customers and reduced SME activity. We have all lost out as a result.
“This dysfunctionality was at the heart of the Banking Commission’s recommendations on RBS. The government and RBS have since come forward with plans for remedy.
“RBS’ SME lending has serious problems. Any remedy must be real enough to force big cultural change and to convince would-be SME borrowers. It remains to be seen whether the planned internal re-organisation will suffice.”
The latest debacle has added to the renewed opprobrium over banking activities and regulation following the recent Co-operative Bank drug scandal involving its former chairman Paul Flowers, who was appointed despite having no banking experience.
Questions have been raised over the approvals process that led to his appointment, in particular because Mr Flowers had no banking experience prior to his appointment. One of the members of the FSA panel that approved Mr Flowers later took a non-executive director role at the bank.
Chancellor George Osborne recently announced that an independent investigation into the Co-op will be launched to investigate recent events and the circumstances surrounding them.
The investigation has been jointly agreed with the two regulators, the Prudential Regulation Authority and the Financial Conduct Authority, who have agreed there is a public interest in a statutory investigation.
The investigation will cover the actions of ‘relevant authorities’ and the institution itself, including prudential issues, governance - including the appointment of senior staff - and acquisitions. The period that the investigation will review will start from at least 2008 and run to at least the present time.
The move follows The Mail on Sunday’s publication of video footage which appears to show the bank’s former chairman and methodist minister Paul Flowers buying cocaine and crystal meth just days after he appeared before the Treasury Committee.
Mr Flowers has apologised in the wake of the drug allegations and since been suspended from both the Labour Party and the Methodist Church.
He was appointed to the Co-op board in 2009 and was chairman between March 2010 and July of this year, when he stepped down amid a capital crisis that has seen its mutual parent cede majority control to US hedge funds.
