Royal Bank of Scotland's new boss admitted on Wednesday night that the reputation of the bailed-out institution has been seriously damaged by allegations that it is deliberately wrecking small businesses in pursuit of profit.
But Ross McEwan, who started as chief executive last month, fought back against the claims made by Lawrence Tomlinson, an adviser to business secretary Vince Cable.
The allegations against the 81%-taxpayer owned bank, in a report published on Monday, have prompted the interest of City regulators and the Serious Fraud Office (SFO).
McEwan said the bank had not received any evidence of a systematic effort to make money from customers by pushing them into its turnaround division, known as the global restructuring group (GRG).
Pledging a full investigation by law firm Clifford Chance, McEwan said: "It is important to note that the most serious allegation that has been made is that RBS conducted a 'systematic' effort to profit on the back of our customers when they were in financial distress.
"We do not believe that this is the case, but it has nonetheless done serious damage to RBS's reputation. No evidence has been provided for that allegation to the bank."
Tomlinson makes allegations in his report – compiled from evidence he had received from businesses – that RBS was pushing businesses into its GRG division, which in turn was buying up properties through its specialist property arm West Register to make a profit.
Sir Philip Hampton, the chairman of RBS, called the allegations "unsubstantiated" and "anecdotal" in an interview with the BBC in which he said the bank had dealt with tens of thousands of customers in distress since the crisis. "If there are facts that show we have behaved in the wrong way then we will take appropriate action," said Hampton, who acknowledged the bank may have been "too heavy" in some instances.
RBS has not received the details of the individuals and businesses used by Tomlinson to compile his report, which Cable has already handed to City regulator the Financial Conduct Authority. The FCA is expected to conduct a detailed analysis of the allegations.
The SFO has not launched a formal investigation but said: "We are aware of the issue and monitoring developments."
The identities of individual customers are not contained in the Tomlinson report – in order to protect their relationship with RBS – but about 20 examples are thought to be attached to the report sent to regulators and the Department for Business.
In his report, Tomlinson, a Yorkshire-based entrepreneur who is also a customer of RBS, said he had "shocking examples of business owners being confronted with last minute demands for information and money" that have forced their businesses over the edge. Tomlinson also called on all banks to look at the way they handle businesses in distress and for the FCA and the government to consider if the current rules are robust enough to protect customers. Lloyds Banking Group is also named in the report but does not face the same criticism as RBS.
RBS was one of the biggest lenders before the 2008 banking crisis and at one stage was responsible for 50% of all property loans to small businesses. A report the bank commissioned into its own lending practices, also published on Monday, by former deputy Bank of England governor Sir Andrew Large, said it had contracted its lending after the crisis too quickly.
McEwan said: "RBS played a big role in the lending boom that led to the UK's economic crisis. After the crash, tens of thousands of our customers saw their asset values plummet and ended up in serious financial difficulty. This was an economic crisis for Britain, but it was also a very personal tragedy for many families and small businesses around the country."
Concerned that the allegations will undermine trust in the bank – already battered by a £390m Libor fine and a mounting bill to compensate small businesses missold interest rate swaps – McEwan insisted the Clifford Chance review would be independent. It would report back by 31 January after scrutinising the main findings of the Tomlinson report, interviewing bank staff and customers and reviewing samples of loans.
Clifford Chance would also advise RBS on whether the allegations appear to have substance and make recommendations about steps, if any, should be implemented as a result.
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