In the wake of accusations that RBS sought to profit from harming rather than helping small business customers, RBS has promised to overhaul the way it handles small and medium-sized businesses in financial distress. Much evidence came to light about the practices of RBS’ turnaround division, Global Restructuring Group (GRG) in a report by Lawrence Tomlinson, an adviser to the UK business secretary Vince Cable.
According to the Tomlinson report the bank has been driving SMEs unnecessarily into a default to move the business out of local management and into their turnaround divisions, generating revenue through fees, increased margins and devalued assets.
The RBC had engaged the law firm Clifford Chance in response to the Tomlinson accusations. Ross McEwan, RBS chief executive, said: “This allegation had a profound effect on the bank and on the work of a team that successfully turns round the vast majority of businesses that it works with. We could not let this allegation hang over us.” “I welcome the Clifford Chance findings which show no evidence of the serious and damaging allegation that we had set out to deliberately defraud our business customers.”
RBS said it would make several changes to the way it handles small businesses in distress. These include winding down West Register, its controversial property unit that has bought assets from distressed business clients, because of “a damaging perception that the bank had a conflict of interest”.
Nevertheless RBS is still being investigated by the Financial Conduct Authority over its treatment of struggling small business customers.
Source: Financial Times