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Royal Bank of Scotland: Small Businesses

Volume 776: debated on Tuesday 15 November 2016


Asked by

To ask Her Majesty’s Government whether they intend to press the Financial Conduct Authority to publish the report, commissioned by the then Secretary of State for Business, Innovation and Skills at the end of 2013, concerning the treatment by the Royal Bank of Scotland of small businesses supposedly in financial distress.

My Lords, the Financial Conduct Authority is an independent body. On 8 November it published a summary of the main findings from the Skilled Persons Review into the Royal Bank of Scotland’s treatment of customers in financial difficulty. The FCA announced that it is carefully considering the report and other additional materials. It is currently assessing what further work may be needed and will publish a full account of its findings when practicable.

I thank the Minister for that Answer. At long last there has been a partial admission by RBS of its wrongdoing, for which the evidence is well documented and incontrovertible. The bank has been endeavouring to improve its financial situation by withdrawing its loans from small businesses that have consequently been driven into bankruptcy. Thereafter, the property department of the bank has been able to acquire the assets of the companies at fire sale prices and sell them on at a profit. The compensation that has been mooted by the bank falls far short of the damage that has been inflicted. Only a small minority of the companies that have survived this treatment can claim compensation. How can a Government who profess to be working in the interests of small businesses tolerate such an abuse on the part of a bank that is in public ownership?

The report to which the noble Viscount refers is indeed a worrying one for RBS. While the review did not find evidence to support the most serious allegations made against the bank, it is critical of some of its actions—for example, the failure to support SMEs in a manner consistent with good turnaround practice and, to pick up on a point made by the noble Viscount, the failure to handle conflicts of interest inherent in the West Register model and operation.

As for the compensation scheme, small businesses that came within the global restructuring group between 2008 and 2013 are eligible for compensation under the scheme. Complex fees will be repaid automatically and then, if people make complaints and are not happy with RBS’s response, they can appeal to the independent third party announced yesterday.

The FCA has a responsibility towards customers and businesses. It has been involved in the construction of the complaints system and has taken into account representations made on behalf of customers. However, it is continuing to consider whether further action is needed, and I know that it will take on board the points that the noble Viscount has just made.

My Lords, surely the Government could join with others in this House, including the noble Viscount, Lord Hanworth, in saying that those who were abused by this scheme should be fully compensated and that there should be a repayment not just of fees but for the damage done in businesses lost and far beyond that. That is a much bigger figure, which the FCA does not seem to have recognised in its report at this stage.

Would the Minister also back the whistleblowers? A number of RBS staff blew the whistle on the practices taking place. Virtually every one of them has found that their careers have ended; they have suffered extensively as individuals but, as far as I can tell from looking at the FCA report, not a word is said. We need whistleblowers and we need to treasure them.

I endorse what the noble Baroness has just said about whistleblowers who put their careers at risk in order to bring malpractice into the public domain. It is not just the fees that are going to be compensated; direct losses will also be eligible for compensation, as will consequential losses where these are directly attributable to the actions of RBS. Established legal principles will be used to determine whether a consequential loss is factually and legally attributable to it. So it is not just the fees; it is direct losses as a result.

My Lords, the Minister will recognise that the bank was bailed out by the taxpayer. Its malfeasances over the last few years—which have led to a very significant drop in its share price—mean that taxpayers are facing a very raw deal if they have to restore the bank fully at some stage in the future. The Minister must appreciate that, even in this latest examination of the issues which he has identified today, there are anxieties that market-sensitive information was leaked. Has the nation not had enough of really poor behaviour by this bank which necessitates more forthright action?

The review covers the period 2008 to 2013, so I am not sure whether the point about malfeasances by the bank is particularly for one of the parties in this House. It is the Government’s intention, in due course, to return RBS to the private sector. That is not immediately practicable at the moment —the issue of Williams & Glyn has not been resolved and there are outstanding legal issues in the United States—but we hope to return the bank to the private sector in due course.

I am not sure to what the noble Lord is referring in his point about leaks. In a letter to the Treasury Select Committee, Tom Scholar has firmly refuted any evidence of inappropriate behaviour by the Treasury. If the noble Lord is referring to action by RBS, that is a matter for RBS.