My Lords, the Government do not routinely assess the impact of any single factor on the value of RBS shares, and have not made an assessment of the impact of the actions of the bank’s global restructuring group—GRG—on their value. The board of RBS is responsible for the commercial and operational decisions of the bank, including in relation to GRG.
My Lords, does the Minister accept that the £400 million set aside by RBS is inadequate to compensate the several thousand small businesses that were mistreated and the many viable businesses ruined by RBS’s global restructuring group? International regulators in the US, Australia and across the EU are looking at similar behaviour by various RBS-owned branches or subsidiaries. Given that, should not the Government, in the name of full disclosure, hold back on their sale of RBS shares until the full impact and damage done for compensation and liability is completely disclosed to any new buyer of shares?
The point that the noble Baroness makes is right in terms of this particular focus. The FCA identified that there had been widespread inappropriate treatment of firms by RBS. We know that small and medium-sized enterprises are the backbone of the economy, therefore mistreatment of that type is taken extremely seriously. As the noble Baroness knows, the FCA has an ongoing inquiry, and is currently assessing what enforcement actions may be taken in the future, so I will be restricted in what I can say. The fact that the Royal Bank of Scotland has come forward and issued a profound apology, and has established a fund to start the process of providing compensation to the 12,000 firms affected, is a step in the right direction. However, we deplore the actions taken which led to that being necessary.
But, my Lords, in addition to the appalling treatment by RBS of small and medium-sized enterprises, and the fact that of course the FCA report on what it did pointed out the appalling behaviour of the board, will the Minister also recognise that the Government chose to sell additional shares, not just after this development but as soon as the fine levied by the United States Department of Justice had been paid by RBS? Is it not quite clear, also given the incentive of reducing aspects of the share price, that the Government are out to reward those who could afford to purchase shares, while the taxpayer loses £3 billion on the transactions carried out by a bank which has let the nation down?
First, on the share price, the noble Lord will be aware—he was on this side of the House at the time it happened—that the shares were purchased for £5 per share. Within three months they were worth £2.20 per share, and we sold them at £2.71. They flatlined for about nine years. Rightly, because of the instruments that were set up by the previous Labour Government, these sales are done by arms-length bodies, so UK Government Investments takes independent advice. They are strictly governed as regards when disposals can take place, to ensure, quite rightly, that we are not in possession of any information which the market is not aware of. Those are established practices; therefore, it was right that actions did not take place while the decision by the US Department of Justice about the scale of the fine was not in the public domain. They have followed those procedures, and we follow them independently, but we are dealing with the legacy issues of some very concerning behaviour.
My Lords, does my noble friend not agree that, although the noble Lords opposite have raised important points, the sale of shares in RBS cannot be dictated by a single situation such as the noble Baroness seems to suggest? It is not just a question of whether the shares can be sold at a profit. They were bought in a distressed situation by the last Labour Government for reasons that we all understand. Now the sale must depend not just on the current market situation but on the way in which the Government feel the market might move in the future and whether the bank would be better off outside the Government’s purview than within it. It might well be able to conduct its business more effectively.
My noble friend is absolutely right. The RBS shares were acquired not as an investment but as a rescue, and all parties supported that systemic action to restore confidence in the sector. When you are left with a large proportion of stock on your hands and you have stated publicly that you want to dispose of that asset, the only way to do it is on independent advice and over a period of time to avoid any market fluctuations, and that is what has been done.
My Lords, the Government have been a majority shareholder in RBS for a decade, during which time the GRG small business restructuring scam took place. From the Cadbury report through to the Walker review, UK corporate governance has relied on shareholder stewardship rather than regulation. What stewardship, particularly with regard to culture and GRG, has been or is being made on behalf of the Government as a major shareholder?
The noble Baroness is knowledgeable in these matters and will know that they are dealt with at arm’s length. We have an arm’s-length relationship with the regulator, operational decisions are dealt with by the bank and the investment is managed by UK Financial Investments. We have made our position very clear: it is important that small and medium-sized enterprises are treated properly, and when proven misconduct has taken place, those businesses should, as far as possible, be adequately compensated for the problems they have been caused.