The Financial Conduct Authority has agreed to publish the full confidential report into the mistreatment of small businesses by the Royal Bank of Scotland, in a significant U-turn by the City watchdog.
The announcement came hours after the bank’s chief executive, Ross McEwan, and chair, Sir Howard Davies, told parliament’s Treasury select committee that they would not prevent the report’s release. The bankers accepted there had been a series of failings over how RBS had handled small business clients struggling in the wake of the 2008 financial crisis.
The move by the regulator less than two weeks after Sir Vince Cable, the Liberal Democrat leader, told parliament of his “disgust” that passages of the report into the scandal at the bank’s Global Restructuring Group (GRG) had not been disclosed.
Despite sections already being leaked, the FCA had argued it could not release the full text as it did not have the consent of the individuals interviewed, and there is also an ongoing enforcement investigation regarding individual bankers’ conduct. Now it intends to seek the individuals’ permission to publish.
The watchdog said: “The FCA welcomes the statement by Royal Bank of Scotland, given at today’s Treasury committee hearing, that they will not object to the FCA publishing the s166 report into the treatment of small and medium-sized enterprise customers transferred to its Global Restructuring Group.
“On this basis, we are content to publish the s166 report. To do so will also require the consent of those who provided the information in the report and any individuals who are identified. We will approach these individuals, once the work on the focused investigation is completed, to ask for their consent to publish.”
The report, which will probably still take years to be made public, includes embarrassing details for RBS, including a memo called “Just Hit Budget!” that was sent to GRG staff in 2009, and which appeared to show the bank prioritising fees ahead of assisting clients with financial problems.
The memo referred to the struggling companies – many of which had been damaged by a banking crisis partly of RBS’s making – as “basket cases”. In a section of the memo headed “‘Rope” staff were told: “Sometimes you need to let customers hang themselves.”
McEwan and Davies conceded during Tuesday’s hearing that RBS was “aggressive” towards some struggling business customers.
Davies told the committee that the “Just Hit Budget!” memo was “the stuff of which nightmares are made” and that “it’s hard to believe how someone could have written in such a way about a customer, or customers”.
However, the bank argued that the worst examples of its conduct were not “widespread”, while confessing it had been “insensitive” and “aggressive” in its dealings. Davies said: “If that is what a customer thinks, then we have to take that on the chin and accept that.”
The hearing also heard some testy exchanges in which voices were occasionally raised by MPs, who appeared frustrated by the bankers’ responses.
Davies was repeatedly accused of chairing a bank lacking ethics. Labour MP John Mann said that RBS was failing to live up to the principles of Thomas Smith, whose Smith’s Bank became part of RBS’s NatWest and who believed in “exact integrity” in business.
Mann was forced to explain to both bankers who Smith was.
The GRG Business Action Group, which represents more than 500 businesses put into financial distress under the bank’s restructuring division, said: “We welcome the FCA’s agreement to publish the report in full, a move we have consistently called for. It is just a pity that GRG’s victims have had to wait for so long, thanks to the pointless intransigence of RBS and the regulator.”
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