The Financial Conduct Authority (FCA) has made a statement regarding the Royal Bank of Scotland’s treatment of struggling small and medium enterprises (SMEs).
The FCA launched a review of the bank’s Global Restructuring Group (GRG) in 2014 after allegations that SMEs were treated unfairly, despite having limited powers over the largely unregulated area.
Promotory Financial Group (Promotory) was appointed to investigate RBS’s treatment of SME customers who had been transferred to the GRG between 2008 and 2013.
With assistance from Mazars, Promotory’s final report examined 207 cases covering six years, and was provided to the FCA in September 2016.
The FCA reported that over a third of the SMEs transferred to GRG over the period were potentially not viable, and that most of the others experienced inappropriate action by RBS.
The report said: “Some elements of this inappropriate treatment of customers should also be considered systematic as 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.”
The report stated that though RBS was not found to have transferred SMEs based on their potential value to GRG, they had failed to ensure appropriate valuations, provide adequate support, and comply with their own communication policy.
The FCA concluded that, despite these actions, there was no evidence of resulting ‘material financial distress’ to SMEs in most cases, but stated it was ‘carefullly considering’ the report, and assessing courses of action.
RBS announced a new complaints review process and refunds for complex fees charged to SME customers in GRG, to address the case, which according to sources amounts to £400m (€448.8m).