Cable alerts City watchdogs over RBS treatment of small business
Government report claims ‘good and viable’ businesses put into default for profit
Business secretary Vince Cable has referred a report criticising high-street bank RBS’ treatment of small business to a number of financial services regulators, calling on them to produce an ‘urgent response’.
The report, conducted by government ‘entrepreneur in residence’ Lawrence Tomlinson, claimed that healthy firms were artificially ‘distressed’ in order to seize assets belonging to them and expose them to higher-interest loans.
Tomlinson’s allegations centre on the bank’s Global Restructuring Group (GRG) division, which handles ailing companies on RBS’ books.
By forcing businesses into default, it is claimed, RBS can make greater revenue by taking advantage of the extensive restructuring powers and higher fees of the GRG.
“I feel really sick sometimes. It is really disturbing,” Tomlinson told the BBC yesterday. “It is ruining people’s businesses for sure, and in some cases having a huge impact on their personal lives too.”
Tomlinson acted independently of the government in conducting the report and did not set out to look exclusively at RBS, but claimed that the bank soon became the focus after talking to small business owners about their experience.
Vince Cable has referred the report to City regulators the Financial Conduct Authority and the Prudential Regulation Authority and called for an immediate response to allegations against the bank, which is 81% owned by the taxpayer.
Building a website for your business idea is easier than you might think. Our online tool ranks the top website builders that offer free trials.
Cable said: “Some of these allegations are very serious and I am waiting for an urgent response as to what actions have been taken.
“I am however confident that the new management of RBS is aware of this history and is determined to turn RBS into a bank that will support the growth of small and medium sized businesses.”
In a statement released yesterday, RBS defended its practices, saying its treatment of small businesses was justified in the light of avoiding bad debt.
The bank said: “In the boom years leading up to the financial crisis, the over-heated property development market became a major threat to the UK economy.
“RBS did more than its fair share to fuel this and commercial property lending was one of the key drivers of our near collapse as valuations rapidly plummeted.
“Facing up to these mistakes has been a difficult, but essential part of making RBS a safe and strong bank once again.”
RBS chairman Sir Philip Hampton sounded a more conciliatory note in an interview with the BBC yesterday, acknowledging that the bank may have ‘got it wrong’ by being ‘too heavy’ with some of its firms.
City law firm Clifford Chance has been tasked with investigating the allegations into RBS, as well as banking culture in general.
Its report is due on the 31st of January and Sir Philip said RBS would co-operate with investigations.