FCA defends inaction over RBS small business mistreatment

Mark Johnson's picture
by Mark Johnson

The UK’s financial watchdog has defended its controversial decision not to take action against the Royal Bank of Scotland or its former executives for past mistreatment of small business customers.

The Financial Conduct Authority said it was standing by its decision not to apply penalties for the actions of RBS's former turnaround unit, the Global Restructuring Group.

Today, the FCA published the final report on its investigation into the matter, saying its powers to discipline the bank for misconduct do not apply.

Today’s ruling

The FCA concluded that taking action was always going to be “difficult and challenging”, but after carefully considering all the evidence it concluded that its powers to discipline for misconduct do not apply and that an action in relation to senior management for lack of fitness and propriety would not have reasonable prospects of success. 

The regulator said it also found no evidence that RBS artificially distressed and transferred otherwise viable SME businesses to GRG to profit from their restructuring or insolvency.  

Moreover, the City watchdog consulted with independent, external leading counsel who confirmed that the FCA’s conclusions were correct and reasonable.

Following that decision and recognising the significant public interest in this matter, the FCA committed to publishing a fuller account of its findings. 

Today’s report sets out in detail why the FCA came to the decision it did. 

“This report provides an extended account of the FCA’s investigative work on GRG”, said Andrew Bailey, FCA Chief Executive. 

GRG fell short on standards

“Our investigation has found that GRG clearly fell short of the high standards its clients expected but it was largely unregulated and so our powers to take action in such circumstances, even where the mistreatment of customers has been identified and accepted, are very limited.

“GRG has been highly damaging for those customers impacted and more widely for the reputation of the banking industry. 

“Combined with other issues that have impacted SME’s it is important for all who work in this sector to regain the public’s trust.

Important changes

“The situation has, however, changed since GRG in several important respects”, Bailey said. 

“Two stand out: first, the Senior Managers and Certification Regime now 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.  

“Second, there has been an extension of the scope of the Financial Ombudsman Service in terms of both substantially increasing the coverage to include many more SMEs, and an increase in the amount that can be awarded in such cases by the FOS.  These are very important changes.

“This announcement concludes our work on GRG. However, we continue to closely monitor the sector and the complaints process overseen by Sir William Blackburne to ensure that things are put right.”

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