The report contained findings from an investigation into an arm of the RBS, the Global Restructuring Group (GRG), a support unit for small and medium-sized enterprise (SME) businesses with financial difficulties.
The findings set out how the GRG’s conflicting objectives of helping struggling SME customers and creating profit for RBS lead to it becoming a “profit centre” for the bank.
It found evidence of “endemic” misbehaviour by GRG staff, where in certain instances they were told to “pick a number, any number” when deciding what fees to charge struggling firms.
Among the inappropriate actions identified by the report was also a confirmation that a controversial “Just Hit Budget” memo was “widely circulated” within the bank arm – the content and tone of which “were never challenged at a senior level”.
The memo told staff to let customers “hang themselves”, and in some cases called clients “basketcases: time consuming but remunerative”.
The report also noted that the actions of the GRG were “indicative of an unprofessional culture that set little store by the interests of its customers”.
Commenting on the publication, Nicky Morgan MP (pictured), chair of the Treasury Committee said: “The findings in the report are disgraceful.
“The overarching priority at all levels of GRG was not the health and strength of customers, but the generation of income for RBS, through made-up fees, high interest rates, and the acquisition of equity and property.”
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 – with one in six, or 16% of firms suffering material financial distress as a result of GRG’s conduct.
A copy of the 361-page report was leaked online and shared widely earlier this month. Shortly after, the committee invoked parliamentary privilege and ordered the Financial Conduct Authority (FCA) to publish the report or face being found in “contempt of parliament”.
The FCA was given a deadline of 16 February to publish, or send a copy to the committee by that date for the committee to publish itself – which it did “immediately”.
Morgan commented: “The committee has not taken the decision to publish lightly.
“Normally, reports prepared under section 166 are confidential, but there is overwhelming public interest in bringing transparency to what happened at GRG, given the earlier leak of the report, and in ensuring that everyone can see, and know that they are seeing, an authentic and verified copy of of author and business consultancy Promontory’s original report.”
A copy of the report can be found here.
An RBS spokesperson said: “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.”
They added: “That is why we put in place two steps – a complaints process overseen by retired High Court Judge, Sir William Blackburne, and an automatic refund of complex fees – to put things right. Any in-scope customer who feels they were treated inappropriately whilst in GRG should make use of the complaints process which the FCA agree is an appropriate response to the findings.”
The FCA is also expected to conclude a focussed investigation in the coming weeks over the RBS management, and their degree of knowledge during GRG’s operations.
The RBS spokespersons said: “The FCA is conducting a second stage of this review, which includes looking at what management knew, or should have known.
“It would be inappropriate for the bank to comment until the FCA has concluded its investigation.”
Morgan added that the committee will continue to examine options to prevent a similar incidence occurring, and how to restore confidence among SMEs in banks.
“As well as continuing to monitor the FCA’s further investigation into GRG, we’ll keep a close eye on RBS’ complaints process to determine whether it is providing the fair and reasonable compensation that has been promised to mistreated customers,” said Morgan.
“Any person referred to in the report is invited to make any observations to the committee,” she added.