FCA publishes final report in relation to RBS GRG

Jun 13th '19

The Financial Conduct Authority (FCA) has today published the final report on its investigation in to Royal Bank of Scotland’s (RBS) treatment of small and medium-sized enterprise (SME) customers transferred to its Global Restructuring Group (GRG). This follows the update provided in July 2018 on the investigation.

In that update, the FCA 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. Also, that it was important to recognise 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 consulted with independent, external leading counsel who confirmed that the FCA’s conclusions were correct and reasonable.

Following that decision and recognising the significant public interest in this matter, the FCA committed to publishing a fuller account of its findings. Today’s report sets out in detail why the FCA came to the decision it did.

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.’

Source: FCA