FCA final report on RBS GRG branded “complete whitewash”

Andrew Bailey

The now notorious GRG has already been the subject of multiple probes since the companies put under its “care” accused the Edinburgh-based lender of pushing them into insolvency so that it could strip them of their assets on the cheap.

Todat’s update on the case follows the one provided in July 2018 on the FCA’s probe, in which the City watchdog said that given the serious concerns that were identified in the independent review it was only right that it launched a comprehensive and forensic investigation to see if there was any action that could be taken against senior management or RBS. It also stressed 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.

The FCA concluded that taking action was therefore 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 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 FCA’s findings were met with anger by campaingers and the SME Alliance, which campaigns for fair treatment of customers by banks and advisers, launched its own investigation into the conduct of the GRG as it aims to see executives held to account for the past misconduct.

Responding to the criticism, the FCA said that it has consulted with independent, external leading counsel who confirmed that the FCA’s conclusions were correct and reasonable.

Following that decision the FCA committed to publishing a fuller account of its findings.

Explaining the contents of today’s report, Andrew Bailey, FCA chief executive, said: “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.”

However, MPs today remained highly critical of the regulator.

“This report is another complete whitewash and another demonstrable failure of the regulator to perform its role,” said Kevin Hollinrake, the co-chair of the All-Party Parliamentary Group on Fair Business Banking.

Mr Hollinrake pointed out that the FCA was supposed to consider the root causes of the failures at RBS and whether they were known about, or authorised by RBS management.

“They have manifestly failed to do this,” he said.

Commenting on the publication of the FCA’s final report, RBS Chairman, Howard Davies, said: “We welcome the conclusion of this investigation and the confirmation that no further action will be taken.

“The FCA has once again confirmed that no evidence was found to support allegations that RBS artificially distressed and transferred otherwise viable businesses to GRG or deliberately made them worse off to profit from their sale, restructuring or insolvency. It also found no evidence that any member of GRG’s senior management sought to treat customers unfairly or behaved in any other way that could call their honesty and integrity into question.

“The bank has acknowledged that some SME customers did not receive the treatment they should have done while in GRG during the relevant period and has apologised. We continue to focus on putting things right for these customers through our complaints process, with independent assurance and oversight from a retired High Court Judge, Sir William Blackburne. The FCA confirmed that this was an appropriate step to take.

“The way the bank deals with business customers in financial difficulty today is fundamentally different to the aftermath of the financial crisis, during what was a hugely challenging time for the bank, its customers and the wider economy. We are committed to ensuring that past mistakes cannot be repeated.”