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RBS’s £400m starter for 10

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RBS announced this morning that it has set up a new complaints process and is to set aside £400m to compensate small businesses that allegedly suffered at the hands of its former Global Restructuring Group (GRG).

This is the latest event in the long-running saga that began in 2013 with the release of the Lawrence Tomlinson report accusing the bank of deliberately putting viable businesses into distress in order to pick up their assets on the cheap. In response, RBS commissioned Clifford Chance to investigate the allegations made, concluding that there was no evidence to support the allegations, 

In January 2014, the Financial Conduct Authority (FCA) finally weighed in by appointing Promontory Financial Group and Mazars to conduct an independent skilled persons report under section 166 of the Financial Services and Markets Act (FSMA) 2000, parts of which were finally published last week.  

While the FCA concluded that there was no widespread practice of transferring customers to GRG for their value, it did state that the bank failed to support businesses “…in a manner consistent with good turnaround practice,” including “…placing an undue focus on pricing increases and debt reduction without due consideration to the longer term viability of customers”.

To muddy the waters even further, just prior to the release of the FCA report, documents passed by a whistle-blower to BuzzFeed News and BBC Newsnight in October appeared to support the allegations made in the Tomlinson report.  The documents apparently revealed that under ‘Project Dash for Cash’  RBS staff were rewarded higher bonuses based on fees collected for ‘restructuring’ business customers’ debts by cutting the size of the loans as well as obtaining cash and/or other assets from the customer.

The complaints process announced by RBS will be overseen by Sir William Blackburne, a retired High Court Judge.  In addition, an automatic refund of complex fees paid by SME customers in GRG will be made.  

If our experience in assisting clients to navigate the bank’s review/redress scheme with respect to interest rate derivative mis-selling is anything to go by (where the bank stated that customers did not require independent advice or assistance), the process of obtaining complete and fair redress for RBS customers many prove to be quite tortuous.  

As with the mis-selling of derivatives, the £400m announced today to pay compensation may just be the opening act of what could turn out to be an arduously long production.

All views expressed here are the author’s own and are based on information and data available at the time of writing.

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