FCA probe RBS treatment of businesses

The director of supervision at the regulator said it was undertaking a section 166 review of damning allegations contained in a report published by Lawrence Tomlinson, entrepreneur-in-residence at the Department for Business Innovation and Skills, last week.

The report, unveiled at the same time as an SME lending report commissioned by RBS itself, claimed that the bank engineered defaults and pushed otherwise healthy businesses into its Global Restructuring Group, damaging their credit status and accelerating their decline.

Mr Adamson said the allegations in the reports gave the FCA “concerns” over whether the bank had treated customers “appropriately”, particularly those under financial strain.

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He added: “If substantiated, such allegations may also indicate wider concerns in relation to governance and culture within RBS. The FCA expects firms to act with integrity across all of their activities.”

The section 166 probe, or “skilled persons” report, will see an appropriate independent figure investigate the claims in an agreed timescale, with further regulatory measures to be considered if necessary.

The FCA is also writing to all high street banks to ask if they have engaged in the “poor practices” alleged in the reports, Mr Adamson said.

He added: “These allegations, if proved, raise serious concerns about how banks’ treat their customers. An SME’s relationship with its bank is essential for any business to have a chance to succeed, and claims like the ones made threaten to undermine that. We expect all firms to act with integrity and put customers at the heart of their business.”

It follows a 26 page report from ratings agency Standards & Poor’s which found that lending to mid-market companies is shrinking faster in the UK than in other developed European markets.

The study stated that while such companies contribute “a great deal” to the UK economy, they are more affected by sluggish bank lending and are being forced to find alternative sources of funding, such as the private placement market.