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.
Download a full copy of the Clifford Chance report (PDF 220KB).
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
