FCA to take no action against RBS over GRG scandal

The FCA has confirmed that it will take no action against Royal Bank of Scotland, despite its 'widespread and systematic' mistreatment of SME customers in its Global Restructuring Group.

Related topics:  Regulation
Rozi Jones
31st July 2018
RBS
"The fact that we can’t take action in no way condones the behaviour of RBS. "

The support unit for troubled businesses came under fire in 2013 after allegations that it mistreated troubled businesses to profit from their financial hardship.

The FCA's independent review, published earlier this year, found no evidence that RBS artificially distressed and transferred otherwise viable SME businesses to GRG to profit from their restructuring or insolvency.

It did, however, identify that many aspects of GRG’s culture, governance and practices were deficient and that in some areas the inappropriate treatment of customers was widespread and systematic.

However because GRG's business was largely unregulated, it is not subject to the FCA's regulatory conduct standards.

In a statement today, the FCA said: "In the circumstances of this case, the powers Parliament has given the FCA do not enable us to take disciplinary action such as fining RBS or an individual.

"The lack of regulatory rules against which GRG could be assessed, in the context of the environment at the time and all the circumstances, means that we do not think we could bring a successful case for lack of competence and capability in relation to senior management."

Andrew Bailey, chief executive at the FCA, said: "Given the serious concerns that were identified in the independent review it was only right that we launched a comprehensive and forensic investigation to see if there was any action that could be taken against senior management or RBS. It is important to recognise that the business of GRG was largely unregulated and the FCA’s powers to take action in such circumstances, even where the mistreatment of customers has been identified and accepted, are very limited. Taking action was therefore always going to be difficult and challenging but after carefully considering all the evidence we have concluded that our 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.

"We have consulted with independent, external leading counsel who has confirmed that the FCA’s conclusions are correct and reasonable.

"I appreciate that many GRG customers will be frustrated by this decision but we have explored all the options available to us before arriving at this conclusion.

"The fact that we can’t take action in no way condones the behaviour of RBS. We expect high standards from the firms we regulate and RBS fell well short in its treatment of GRG customers.

"We feel strongly that those companies that have suffered loss as a result of how they were treated whilst in GRG must be appropriately compensated. We are closely monitoring the complaints process overseen by Sir William Blackburne, an independent third party, to ensure that things are put right.

"Although commercial lending to SMEs is not regulated by the FCA, the Senior Managers Regime (introduced in 2016) means that we are now able to hold senior management of banks to account for the way that they treat their SME customers and the FCA will do that."

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