Another political mini-barmy has broken out between Andrew Tyrie, chairman of the UK’s powerful Treasury Select Committee, and RBS over whether a controversial unit at the state-owned bank that dealt with distressed loans to small businesses was or was not a “profit centre”.
RBS executives clashed with MPs last month in over whether the business, known as “GRG,” was improperly incentivised to maximise its returns, at the expense of the struggling businesses it was tasked with dealing with, FastFT reports.
On Tuesday, Mr Tyrie crowed that RBS had now apparently conceded that GRG was in fact a “profit centre” - the conclusion reached by Sir Andrew Large, a former banker who was asked by RBS to investigate its treatment of small businesses:
“In a hearing with the Treasury Committee in June, RBS flatly contradicted Sir Andrew Large’s description of GRG as a profit centre. A month later, RBS now accepts that GRG was a profit centre after all.
“RBS had not objected to the term ‘profit centre’ when given extensive opportunity to comment on drafts of Sir Andrew’s report last year.
“Yet it decided to contest the term in evidence to the Committee, not only in a written statement in February, but also repeatedly in its public hearing in June.
“Following the Committee’s decision to write to Sir Andrew Large for clarification, RBS has now offered the Committee what it euphemistically describes as ‘additional comments’. In fact, they have done a belated U-turn. It’s not as if the facts have changed. So it now appears that RBS has been wilfully obtuse with the Committee.
“If this is how RBS deals with a parliamentary Committee, how much can customers and regulators rely on it to be straightforward with them?”
So far, so political point scoring.
But is that what RBS actually said?
We’ll let readers judge for themselves. Here’s the full excerpt from RBS’s explanatory letter to the committee - emphasis ours:
“Firstly, with regard to the term of ‘profit centre’ we wish to make clear we do not disagree with the way that that accounting term was used by Sir Andrew Large in his report.
“Sir Andrew clearly set out his definition for that accounting term in his glossary and it is indeed the case that the financial performance of GRG was monitored to enable us to understand GRG’S financial performance.
“This is a standard accounting practice across all sectors of our business (for example our Property Service division, which exists to support amongst other things our branch network, can also be classified as a profit centre by virtue of its recordings of assets, as well as costs and income).
“However, what Mr Sach and I were taking issue with is the way others have used Sir Andrew’s report to suggest that GRG had a profit motive with a prejudice against our customers, rather than a turnaround motive. Indeed as Mr Sach pointed out in his evidence, far from making any profit for the bank, GRG has recorded a substantial loss over recent years.