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Home > News > “Dash for cash” update – announcement from the FCA and RBS about the Global Restructuring Group (GRG)

“Dash for cash” update – announcement from the FCA and RBS about the Global Restructuring Group (GRG)

20 December 2016 | Richard Gore

A few weeks ago we reported that leaked documents have shown that Royal Bank of Scotland’s Global Restructuring Group (GRG) secretly tried to profit from ailing businesses by purchasing assets from them “on the cheap”, despite claiming to be helping them.

The Financial Conduct Authority (“FCA”) stepped in and it has now released a statement on its review of RBS’ treatment of SME customers referred to GRG between 2008 and 2013. This followed an announcement by RBS about how it would be addressing its failings.

RBS announced, following discussion with the FCA, that there will be a new complaints review process put in place, as well as an automatic refund of complex fees charged to SME customers in GRG. However, RBS has only set aside £400m indicating that the bank has not considered consequential loss claims or any other losses suffered by customers, aside from complex fee charges.

The FCA says “While the FCA still needs to see further detail about how the scheme will operate, we believe that it is an important step for RBS to put in place an appropriate complaints review process which should provide certain SME customers with a route to make a formal complaint, should they wish to do so. Additionally, RBS has agreed to provide automatic refunds for complex fees to some SME customers.

The FCA has also announced the principle findings of a report which it commissioned into RBS’ treatment of SME customers who were transferred to GRG between 2008 and 2013. Whilst some of the findings support the way in which RBS dealt with customers, the report highlighted certain areas where inappropriate treatment by the bank of SME customers appears to have been systematic and widespread. These include:

  • the failure to ensure that appropriate and robust valuations were made by staff, and carrying out internal valuations based upon insufficient or inadequate work – especially where significant decisions were based on such valuations. This is crucial, as a low valuation was often used by the bank in order to allow it to enforce a loan to value breach. This would then cause significant problems for the customer which the bank could then use to its advantage;
  • placing an undue focus on pricing increases and debt reduction without due consideration to the longer term viability of customers;
  • the failure to comply with RBS’s own policy in respect of communicating with customers around transfer, with the standard of much communication being poor and in some cases misleading; and
  • the failure of GRG to adopt adequate procedures concerning the relationship with customers and to ensure fair treatment of customers.

The report estimates that over a third of the SME customers who were transferred to GRG between 2008 and 2013 were potentially not viable and could be expected to face insolvency regardless of the bank’s actions.

Of those customers who were potentially viable, the report found that most of them experienced some form of inappropriate action by the bank indicating that this was systematic and widespread.

The FCA’s statement concludes: “The FCA is carefully considering the Report and other additional material. The activities carried out by GRG and addressed by RBS’s proposals are largely unregulated; therefore, the FCA’s powers are limited in this area. The FCA is currently assessing what further work may be needed given the findings in the Report.

As things stand, the FCA has only asked the bank to refund excessive fees. Some customers will no doubt have significant consequential claims in respect of enforced personal guarantees, the destruction of a business and other losses. This has not yet been addressed by the FCA.

If you believe you may have a claim, please contact Lucy Mills on 0117 906 9400 or lucy.mills@gregglatchams.com

 

 

 

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.

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