Royal Bank of Scotland has set aside £400m to deal with compensation after the Financial Conduct Authority has published details of its review into the bank's treatment of SME customers in financial difficulty.
The skilled person review, carried out by Promontory, found that while RBS did not set out to artificially engineer the transfer of companies to its business support division, there were “isolated examples” of poor practice.
These include the failure to support SME businesses “in a manner consistent with good turnaround practice” and focusing too much on pricing increases and debt reduction “without due consideration to the longer term viability of customers”.
RBS has announced a new complaints review process which will be overseen by Sir William Blackburne, a retired High Court judge.
It will also put aside £400m to refund “complex fees” paid by some small businesses moving into RBS’s Global Restructuring Group.
The culture, structure and way RBS operates today is fundamentally different from the period under review.Ross McEwanIn a statement this morning, the FCA welcomed these announcements.
It said: “While the FCA still needs to see further detail about how the scheme will operate, we believe that it is an important step for RBS to put in place an appropriate complaints review process which should provide certain SME customers with a route to make a formal complaint, should they wish to do so.
“In particular, the FCA notes and welcomes the involvement of an independent third party to provide oversight of the complaints review process.
“The independent third party will provide reports to the FCA on a regular basis.”
The FCA added that it is currently considering Promontory’s report and is assessing what further work may be needed, but pointed out that the activities carried out by GRG were largely unregulated so its powers are limited.
In November 2013 the government appointed "entrepreneur in residence" Lawrence Tomlinson published a report making a number of allegations against RBS, including that it artificially distressed otherwise viable businesses and put them on a journey towards administration, receivership and liquidation.
It also alleged that once transferred into GRG, the businesses were not supported properly and this had a “catalytic effect” on the journey to insolvency.
In January 2014 the FCA said it would carry out a review into issues surrounding RBS, which was due to be published at the end of 2015.
RBS responded by appointing Clifford Chance to investigate and it found it could not assess the allegations because it was “difficult to understand” how the bank calculated the fees which it proposed to customers in any particular case.
Ross McEwan, chief executive of RBS said: “We have acknowledged for some time that mistakes were made.
“Some of our customers went through what was a traumatic and painful experience as a result of the crisis.
“I am very sorry that we did not provide the level of service and understanding we should have done.
“The culture, structure and way RBS operates today is fundamentally different from the period under review.”
