Enough damage has been done, RBS needs to admit its faults’

The Guardian, 14.10.16

 

Lawrence Tomlinson

Next month it will be the third anniversary of the publication of my report into banks’ treatment of small and medium sized businesses. The main findings of my report related to the Royal Bank of Scotland’s turnaround division, global restructuring group (GRG). For those not familiar with the Tomlinson report, I concluded that GRG was not only preventing customers from returning to health but were taking excessive fees and getting hold of businesses’ assets in the process. [The bank has denied these allegations].

 

Earlier this week, BuzzFeed News and BBC Newsnight released shocking leaked documents that appear to provide proof to back up my findings. When Heidi Blake, a tenacious reporter from BuzzFeed News, first approached me with the documents I was hit by a mix of emotion – was I surprised by the content of the documentation? No. Was I surprised to see it in a written form after three years of denials from the bank? Yes.

 

The files were perplexing in the simplicity of what they showed. Dated 2011, 2012 and 2013 and in the possession of the bank’s top executive team, these files marked “secret” included policy and procedural statements about the purpose of GRG which demonstrated that the bank’s top concern was to recover its position by taking excessive fees and interest; taking possession of assets/equity stakes and reducing the number of risk-weighted assets on RBS’s books.

 

Page after page of documentation boasts about the “value added” to the bank’s balance sheet through GRG and the £1.2bn of profit it gained from interest and fees. Despite RBS claiming GRG “successfully restructured thousands of SMEs”, the files showed just how few businesses actually returned to “healthy” and even when they did, the documents indicated it would be with higher fees and less assets in the long term. Possibly even different business owners.

 

In contrast to their previous statements, RBS’s Jon Pain (chief conduct and regulatory affairs officer) now concedes that GRG had two purposes: “RBS has been very clear that GRG’s role was to protect the bank’s position, where possible by working with distressed businesses to return them to financial health”. In other words: return businesses to health only if it was in the bank’s interest. There is still no acknowledgement by the bank of the conflict of interest this lack of transparency presents. [RBS admits “in the aftermath of the financial crisis … we let some of our SME customers down”, but denies it deliberately caused viable businesses to fail and that it “inappropriately targeted such businesses to transfer them to GRG or drove them to insolvency”.]

 

We can all agree that 2008-09 was a very different time and the banks had over lent, and needed to sort out their balance sheets. There is therefore nothing wrong in principle with the bank wanting to protect its position and “get out” of businesses it no longer wanted to support. GRG, however, went too far.

 

As BuzzFeed News says: “RBS systematically crushed British businesses for profit”. The bank told the customer that GRG was taking over their relationship management to turn the business round, but then aimed to recover the bank’s position through fees and property acquisitions. This is the crux of it. The bank may have had the right to pull a loan, even when the breach is only technical, but what GRG did was to tell the business it was there to help while gaining as much “upside” as it could before a formal administration process.

 

The pressure is now on for the Financial Conduct Authority to publish its report. It has been three years and it has surely had access to this information so why the reticence to publish? The next instalment of the story was released by BuzzFeed News on Wednesday, which suggests that governmental interference may play a part in this never-ending saga.

 

We need to stop and collect ourselves about what is important here. People have lost jobs and businesses closed as a result of GRG, impacting on our economy. Enough damage has been done and it is now time that RBS admits its faults, puts its hands up and compensates those businesses for their losses so our SME sector can be reinvigorated to continue propelling our economic growth.

 

An apology would be nice too…

 

Lawrence Tomlinson is author of the Tomlinson report and a former adviser to Vince Cable. He was entrepreneur in residence at the Department for Business, Innovation and Skills in 2013.

 

View original post on The Guardian