Nicky Morgan MP, chair of the Treasury Committee, has given the FCA a deadline of 16 February, or this Friday, to publish the unredacted version of the report, which investigated the actions of an arm of the Royal Bank of Scotland (RBS) – the Global Restructuring Group (GRG), a support unit for troubled businesses during the financial crisis.
The FCA has declined to publish the 361-page report, but a copy was leaked on 12 February 2018 which was subsequently widely shared across social media.
“A version of the report is now in the public domain. The FCA has completely lost control of the publication process,” said Morgan.
She then warned the financial watchdog that if it does not meet the deadline this week, it will have breached an order of the House of Commons and could be found in contempt of parliament. If the FCA is not ready by the deadline, the committee has ordered that the report be sent to the committee on the same date instead.
Andrew Bailey, chief executive of the FCA, had previously argued that publication was prevented by legal requirements for consent and to provide a right to reply to all persons involved in the report.
Bailey further warned that if the committee decided to publish the report, it could set a precedent that could jeopardise future works of this kind.
Nevertheless, Morgan confirmed the order, and said: “The committee will meet when parliament returns on Tuesday 20th February. At that meeting, I will be asking members to agree to publish the final, unredacted report under parliamentary privilege as soon as possible.”
A spokesperson for the FCA has confirmed that the financial watchdog will not release the report itself, but will send it to the committee as requested.
“Our view is that publishing [the report] ourselves would breach certain legal rules, but we will provide it to the committee because they have demanded it under parliamentary privilege,” said the spokesperson.
She added: “It’s a decision for the committee whether to publish it themselves.”
Endemic mistreatment
A version of the full report seen by Mortgage Solutions detailed “endemic” misbehaviour by GRG staff, where in certain instances GRG staff were told to “pick a number, any number” when deciding fees to charge the struggling firms.
GRG operated from 2005 to 2013, and at its peak handled 16,000 companies. The FCA report investigated a period during which GRG handled 5,900 firms.
Overall, the report found that 92% of clients experienced some form of inappropriate action, said the report – with one in six, or 16% of firms suffering material financial distress as a result of GRG conduct.
The investigation was prompted when GRG was accused in 2013 by businessman Lawrence Tomlinson of purposely undermining businesses in order to reap profits from fees, and to purchase their assets at an undervalued price.
The investigation did not find that RBS “engineered” business defaults for profit, but stressed that there was “widespread inappropriate treatment of customers” by GRG.
“There was a failure to put in place the appropriate governance and oversight policies, procedures and processes (including in relation to staff objectives) to ensure that a reasonable balance was struck between the interests of the bank and those of its SME customers,” read the report.
“It is clear that the bank was aware, at least in part, of some of these failures but, it would appear, chose not to prioritise action to overcome them,” it continued.
An RBS spokesperson said: “Although the regulator has confirmed that the most serious allegations have not been upheld, we know that the bank got a lot wrong in how it treated some customers in GRG during the crisis.”
They added that a complaints process overseen by retired High Court Judge, Sir William Blackburne, and a complex fee refund process has been put in place.
“We are deeply sorry that customers did not receive the experience they should have done while in GRG. The report makes for very difficult reading and some of the language used by our staff in the past was clearly unacceptable,” the spokesperson continued.
“We have accepted all the relevant recommendations from the report and our focus is now on rebuilding trust and supporting our customers.”
