RBS responds to Clifford Chance report into allegation of systematic fraud
RBS also announced a range of actions to ensure that it can enhance its support for SMEs when they get into financial trouble.
RBS appointed Clifford Chance to undertake a thorough and independent review of the central allegation made by Lawrence Tomlinson in his report that the bank, through its Global Restructuring Group (GRG), was guilty of systematically setting out to defraud its small business customers. Clifford Chance concluded that there was no evidence to support this damaging and serious allegation.
In compiling their report Clifford Chance interviewed 138 small business customers in the recovery unit, 45 employees and reviewed 130 files, comprising 400,000 pages and 1,200 documents.
Ross McEwan, RBS CEO, said:
"The trust that a bank has with its customers is fundamental. That trust was put at risk at RBS by the allegation of systematic abuse made in the Tomlinson report. 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.
“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. That's why we acted quickly to appoint Clifford Chance to get to the truth of this claim. We are determined to earn back the trust of our customers.
“Following the reckless lending that led up to the financial crisis, the bank’s shareholders and customers lost billions of pounds on bad loans. The bank, through its restructuring team, helped minimise those losses where it could, successfully turning round thousands of businesses, safeguarding hundreds of thousands of jobs. This required the bank to make incredibly difficult decisions, but our first priority then and now is to try and help our customers recover.”
Jon Pain, Chief Conduct and Regulatory Affairs Officer, said:
"Clifford Chance was given full access to all the files, paperwork and people they requested to see within the bank. They looked extensively into over a hundred SME customer cases. Inevitably, given the sheer number of cases we have worked with, some questions and issues were identified and we learn lessons from these, but there was no evidence to support the most serious allegation or any other evidence of misconduct. Dealing with customers in financial distress is one of the most difficult things in banking. We will continue to do everything we can to improve the experience of those businesses that get into trouble.”
RBS will cooperate fully with the on-going FCA inquiry which is looking at all aspects of how the bank works with distressed businesses, and will ensure that the Clifford Chance report is available to the FCA for their investigation. RBS has also commissioned a review for Ulster Bank customers in the Republic of Ireland into this same allegation.
The report found some cases where customers felt the bank’s fees lacked clarity and that although no evidence was found, a handful of customers made allegations around the behaviour of RBS staff. RBS is thoroughly investigating these cases and is clear that it will not tolerate such behaviour.
RBS is today setting out further steps to rebuild trust with its customers. These measures build on changes made in response to the findings from the Sir Andrew Large review. For example, the bank has stopped the so called "double handover" where a customer used to get a new relationship manager when they first need support and then another relationship manager on entering the restructuring unit. Further steps that will be taken include:
- All major banks charge default interest when an SME customer goes into default in recognition of the change in risk profile. From a customer’s perspective this can sometimes feel like an additional cost at the point when they are least able to afford it. RBS is today announcing that it will not charge default interest for the first 90 days when an SME customer defaults. This will be effective until May 31st 2015 and reviewed at that time. RBS has also stopped other smaller fee practices as it seeks to improve the experience for customers when they first go into distress
- For many small business owners the stakes are high and the restructuring process can be particularly distressing. RBS will continue to look to improve transparency so our customers better understand what we do and why, especially around charges and fees and why they have entered the restructuring unit. We will also give customers 30 day notice for any change in fees. This will build on work already underway. We will also work with business organisations to ensure we can better serve our business customers
- Under the previous capital regime property purchases were a viable option when resolving some corporate restructures. Clifford Chance has found that the banks vehicle for bidding on property, known as West Register, operated largely in an open market process and with strict internal controls. However, RBS acknowledge there was a damaging perception that the bank had a conflict of interest when it purchased a property as part of a restructuring process, despite the fact that West Register has only successfully bid for property owned by 166 SMEs in the last five years. The bank has taken the decision to wind down and sell any assets in West Register
- RBS will build on a comprehensive training programme already in place for relationship managers and restructuring teams, to ensure they implement this more transparent approach. RBS’ first priority is and always has been to return a customer’s business to good health
16 January 2014In November 2013 Dr Lawrence Tomlinson in his role as Entrepreneur in Residence, Department for Business, Innovation and Skills, published a report entitled "Banks' Lending Practices Review: Treatment of Businesses" (the Tomlinson Report).
The demand for more labour and a surge in self-employment continues to drive the UK unemployment rate down. House price gains remain strong and inflation is still low. It’s been the story of the UK economy in 2014. But the missing piece of the puzzle remains wages. Until productivity improves, earnings are unlikely to budge.
There are 10 comments add yours
- What a 'failing' - to ALL those Small Business owners who lost more than a 'business' - they've lost their dignity after developing a business plan, securing funding and working hard to improve their Social Mobility... only to be failed. How can it be acceptable that a bank - whose biggest shareholder is the public - be allowed to choose who investigates its wrongdoings? Vince Cable needs to be held to account on this for allowing the betrayal of an ethical approach towards the public?
- Patrick I Weekes
- I truely believe that the Clifford chance report was a complete white wash by the rbs what about the 200k EFG that I was asked to take to allow the natwest to reduce my O/D without my prior knowledge plus the 530k directors loan that had to be signed over to the bank first as a government requirement or so we were told
- David White
- RBS get ready for thousands of court case for your actions against businesses it looks like nothing as changed at RBS you live in your own bubble soon it will burst .And just may be someone will end up in prison ,,,
- Tony Sewell
- Did we ever feel there would be a different outcome. No Based on the fact that there are no administrative records to show the behavior of these bankers, we are all the ones that have lied. None of us imagined these meetings, I for one had witnesses at my meetings, Clifford Chance never interviewed them, wonder why. The fact that this has been covered up, probably points to it being endemic within the bank, the one thing they desperately need to disprove.
- Iain Lindsay
- RBS are the worst bank in the world. I do not have any direct experience of this however I have read about it, have friends who have been systematically raped by RBS and have the docs to prove it I own two successful businesses and due killing my pals business off. I have paid off my overdrafts and moved to Santander with their fixed fees for business account. Saved myself loads of money vis a vis RBS greedy fee structure. They do not deserve my hard earned cash. Iain Lindsay. Perth Scotland.
- As a small business with a RBS account I can think of many criticisms as to the way they operate but the IAS ascertion that the Clifford Chance report is a failing and that there has been a betrayal of an ethical approach towards the public is completely without substance. I know personally that GRG operates to the highest ethical practices in what is an extremely difficult situation.
- I find the fact that RBS GRG had no discernible pricing model or justification for the charges levied by GRG quite astonishing. What company in the real world operates in that way? In any other situation, if you had leverage over a vulnerable company or individual and you applied non specified or non-qualified charges there would be severe ramifications.
- Unfortunately, Moscow office of The Royal Bank of Scotland can’t see correspondent banks in the head office of The Royal Bank of Scotland, because it’s different legal entities. this information can only be obtained from your office of The Royal Bank of Scotland.
- colin jones
- Having been systemically defrauded by GRG's non specific business guidelines to charges and fee's I feel strongly GRG should be as is going to happen - shut down and dissolved. The CC report fell short because people such as myself would never reveal information to CC about RBS when we will have a court battle against RBS in the future, the whole thing was a PR exercise for RBS which costed the tax payer £1.5 million or £25,000 per page.
- Mark Greenwood
- Mark Greenwood SME Businessman vs Natwest/RBS - for registering a number of erroneous defaults with Equifax & Experian every month for a year that caused his business to collapse. Natwest admits liability but claims that mortgage lenders' decisions were not impacted by the repeated erroneous defaults and therefore no loss was caused. The big showdown May 6th at the Royal Courts of Justice - London. Find MarkGreenwood72 on Twitter.