"This report is another complete whitewash and another demonstrable failure of the regulator to perform its role."
In an update provided in July 2018, the regulator announced that it would take no action against RBS, despite finding "widespread and systematic" mistreatment of customers.
The FCA has defended its reasons for taking no action as GRG's business was largely unregulated and therefore not subject to the FCA's regulatory conduct standards.
The regulator said that its "powers to take action in such circumstances, even where the mistreatment of customers has been identified and accepted, are very limited".
In its report, the FCA concluded that taking action was "therefore always going to be difficult and challenging".
It added that 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 FCA also found no evidence that RBS artificially distressed and transferred otherwise viable SME businesses to GRG to profit from their restructuring or insolvency.
The regulator added that it consulted with independent, external leading counsel who agreed that the FCA’s conclusions were "correct and reasonable".
However the All-Party Parliamentary Group on Fair Business Banking have criticised the FCA's approach to the investigation.
Kevin Hollinrake MP, co-chair of the APPG, said: "This report is another complete whitewash and another demonstrable failure of the regulator to perform its role. Phase 2 of the FCA’s own Final Requirement Notice was supposed to “consider the root causes” and establish whether “the causes of such treatment were known about, authorised by and/or sanctioned by management within RBS Group”. They have manifestly failed to do this.
"In its statement last year of 28th July 2018, the FCA concluded that its “powers to discipline for misconduct do not apply”. It could find “no evidence of dishonesty, lack of integrity” any “absence of competence or capability”, anyone acting “recklessly or with a dodgy “ethical compass” and did not “make findings about misconduct” amongst the senior management team. How then did the UK’s biggest ever banking scandal take place?
"The FCA must publish a full account of its findings including naming those responsible for the shameful mistreatment of thousands of UK SMEs."
Nicky Morgan MP, chair of the Treasury Committee, added: “This long overdue report will offer no solace to those who suffered from the disgraceful actions of RBS’s GRG.
“As the Treasury Committee said in our SME Finance Report last year, the FCA should now be given the powers to regulate commercial lending to adequately protect SMEs.
“Disappointingly, the Government did not see a case for doing so; it should urgently reconsider its position. Otherwise, scandalous events such as those at GRG could re-occur.
“The Government should also reconsider its rejection of the Committee’s proposal for the introduction of a Financial Services Tribunal for SMEs to settle disputes with their bank.
“The Committee continues to take an interest in the progress of the complaints process and urges RBS to ensure that the remaining complaints are dealt with swiftly and fairly.
“The Committee may choose to raise this with the FCA when we take evidence from them on 25 June.”
Andrew Bailey, chief executive of the FCA, commented: "This report provides an extended account of the FCA’s investigative work on GRG. 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.
"The situation has, however, changed since GRG in several important respects. 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."
