HM Treasury 

FCA urged to regulate commercial lending

FCA urged to regulate commercial lending

MPs have called for the commercial lending sector to be regulated after the Financial Conduct Authority was unable to act on the Royal Bank of Scotland’s treatment of small businesses.

In a final report, published by the FCA yesterday (June 13), the regulator stood by its earlier decision to take no action against RBS and stressed its powers to discipline did not apply to the bank’s unregulated activities.

But MPs have said this report offered "no solace" to those who suffered from the "disgraceful actions" of RBS's Global Restructuring unit and pushed for further regulation in the sector.

The regulator had been investigating RBS's Global Restructuring Group — its support unit for troubled businesses — following concerns it was artificially distressing and transferring otherwise viable small businesses to profit from their restructuring or insolvency.

More than 12,000 companies were transferred into GRG between 2007 and 2012.

Nicky Morgan MP, chair of the Treasury committee (pictured), said: "This long overdue report will offer no solace to those who suffered from the disgraceful actions of RBS’ GRG.

"As the committee said in our small to medium enterprise finance report last year, the FCA should now be given the powers to regulate commercial lending to adequately protect SMEs."

Ms Morgan said it was disappointing the government had not seen a case for doing so and stressed it should urgently reconsider its position.

"Otherwise, scandalous events such as those at GRG could re-occur," she added.

Ms Morgan also said: "The government should also reconsider its rejection of the committee’s proposal for the introduction of a financial services tribunal for SMEs to settle disputes with their bank.

"The committee continues to take an interest in the progress of the complaints process and urges RBS to ensure that the remaining complaints are dealt with swiftly and fairly."

Ms Morgan went on to say the committee may choose to raise these concerns with the FCA when the regulator gives evidence on June 25.

However the FCA's latest report noted that regulatory changes had occurred since the case against RBS hit the headlines.

In March 2016 the Seniors Managers and Certification Regime was rolled out to banks. The regulator stated if the SM&CR had been in force during the review period, it would have had a clearer understanding from the start of which individuals were responsible for RBS and GRG activities.

The aim of the SM&CR is to reduce harm to consumers and strengthen market integrity by creating a system that enables firms and regulators to hold people to account. 

As part of this, the regime defines the responsibilities and accountability of senior managers in authorised firms in a way which applies to all activities they conduct — whether they are regulated activities or not.

On top of this, the FCA would have had jurisdiction, if there was sufficient evidence, to take action against RBS senior management for breaches of the conduct rules despite GRG’s activities being largely unregulated.