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No action by FCA against RBS regarding the Global Restructuring Group (GRG)

31 July 2018

It’s been announced that no action will be taken against the Royal Bank of Scotland and its managers over the activities of its Global Restructuring Group (GRG).

Earlier this year, a review into the GRG turnaround unit was published where it was found that thousands of small firms were mistreated. Directors reported that once their business was transferred, they were stripped of their assets and some became insolvent.

Promontory Financial Group and Accountancy Firm, Mazars, have done a review into the treatment of the SME customers transferred from RBS to the GRG and found no evidence that customers were transferred deliberately, for the company to profit from their insolvency or restructuring. It was found that the GRG lacked aspects of culture, governance and practises which resulted in the widespread, systematic inappropriate treatment of customers. 

The Financial Conduct Authority (FCA) said that no action would be taken, with a report to explain the reasons for this, being published later this year. Whilst awaiting this report, the FCA will ensure to supervise the action RBS is taking and review how the bank will compensate the victims. RBS chairman, Howard Davies, has said that when the report is published, they would take time to carefully reflect and learn from the findings.

So far, victims of GRG have been offered a total of £125m.

Andrew Bailey, chief executive of the FCA says that ‘’it is important to recognise that the business of GRG was largely unregulated’’. This made the FCA’s powers to take action very limited and appear a challenge, despite the mistreatment of customers being confirmed.

"I appreciate that many GRG customers will be frustrated by this decision, but we have explored all the options available to us before arriving at this conclusion. The fact that we can't take action in no way condones the behaviour of RBS. We expect high standards from the firms we regulate, and RBS fell well short in its treatment of GRG customers."

Nicky Morgan, chair of parliaments Treasury Committee said that for the GRG victims, the decision would be ‘’disappointing and bewildering’’. He believes this indicates a change is needed in how lending for SMEs is to be regulated.

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