FCA to take no action against RBS over GRG scandal

31st Jul 2018 10:23

(Sharecast News) - The Financial Conduct Authority said it would take no action against Royal Bank of Scotland or former managers of the bank's GRG unit over its treatment of small business customers. The regulator said its scope for enforcement action was limited because it does not regulate commercial lending to SMEs. Even where customers have been mistreated its powers are constrained, it said.The FCA's decision follows years of pressure from customers and campaigners over how businesses were treated by GRG - RBS's global restructuring group - in the years after the financial crisis. RBS has set aside £400m to compensate GRG customers.The regulator has been embarrassed by the affair after MPs forced the publication of a report commissioned by the FCA that was damning about how GRG operated. The FCA had witheld the report partly because it feared being sued by RBS.Andrew Bailey, the FCA's chief executive, has been critical of RBS while maintaining that the FCA's scope for action was limited. The independent report found no evidence of criminality at GRG but identified "inappropriate treatment" of viable businesses.Announcing the decision not to take further action, Bailey said: "Taking action was always going to be difficult ... We have concluded that our 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."I appreciate that many GRG customers will be frustrated by this decision but we have explored all the options available to us before arriving at this conclusion."GRG was meant to help struggling businesses reorganise but hundreds of former RBS business customers have accused GRG of driving them out of business and picking off their assets in the five years after 2008. Parliament's Treasury committee accused GRG of undermining confidence in the banking industry's treatment of small businesses.Bailey said: "The fact that we can't take action in no way condones the behaviour of RBS. We expect high standards from the firms we regulate and RBS fell well short in its treatment of GRG customers." He has criticised RBS for its past rejection of valid complaints about GRG.Howard Davies, RBS's chairman, said: "The board welcomes the FCA's confirmation that it has concluded its investigation into the bank and that no further action will be taken. We await the publication of the FCA's full account and will reflect carefully on its findings to learn any further lessons from what was a hugely challenging time for the bank, its customers and the wider economy."