RBS to set up compensation scheme for businesses affected by turnaround unit


The bank has faced claims that it profited from customers who were in financial distress by putting them in its Global Restructuring Group (GRG), a unit that was supposed to aid their turnaround, the Telegraph reports.

A number of small businesses have threatened to sue RBS over the alleged misconduct, including a former chief executive of Torex, who has already filed a lawsuit in London for at least £30m.

Last month, campaigners from the RBS GRG Action Group called on the bank to compensate 50 businesses to the tune of at least £2bn.

RBS said today it “could have done better for SME customers in GRG” and that it “did not always handle customer complaints well”.

However, a report by the Financial Conduct Authority today cleared the bank of serious wrongdoing, concluding that it did not “artificially engineer a position to cause or facilitate the transfer of a customer to GRG”.

Nonetheless RBS has announced that it would set up a new complaints procedure for affected customers and an automatic process to refund fees. It estimates the cost of this will be around £400m.

“This will save customers from further delay, ensure that the bank can start refunding fees more quickly and demonstrate our commitment to addressing issues of the past,” it said.

Chief executive Ross McEwan said last month that GRG, which was created to handle loans classed as being risky, “did not always meet the standards it set itself in dealing with customers who were having difficulty with their loans”. Many of GRG’s top managers have left and its operations have been folded into other parts of the bank.

The FCA report has been dogged by months of delays after initially being commissioned in 2014. It reviewed six years of files from 2008 to 2013.

In a summary of its findings, the FCA concluded that “there was not a widespread practice of identifying customers for transfer [to GRG] for inappropriate reasons”. However it identified a number of issues, including ” the failure to support SME businesses in a manner consistent with good turnaround practice” and other “isolated examples of poor practice”.

It also criticised RBS for failing to reconcile the twin aims of GRG, which was to help stricken small businesses while also trying to make a profit for the bank.

Some “inappropriate treatment of customers” was “systematic”, the FCA said. “It resulted from a failure on the part of RBS to fully recognise and manage the conflicts of interest inherent in GRG’s twin commercial and turnaround objectives and to put in place the appropriate governance and oversight procedures to ensure that a reasonable balance was struck between the interests of RBS and SME customers.”

It added that RBS’s proposals today “were developed with our involvement. We agree these are appropriate steps for RBS to take”.

The Telegraph reported at the end of last month that bosses at RBS believed the lender would be cleared of the most serious allegations levelled at GRG in “weeks not months”.

A 2014 report from Clifford Chance, commissioned by the bank itself following the original allegations, said it had found “no evidence” of wrongdoing by RBS and that its review of the GRG had found nothing to suggest small business customers had failed because of actions taken by the lender.

But it said that it “found it difficult to understand how the bank calculated the fees which it proposed to customers in any particular case” and called for greater transparency.

Shares in RBS, which is still 73 per cent owned by the UK taxpayer, fell 0.86 per cent in morning trade to £1.84.