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Royal Bank of Scotland has this week denied fresh allegations that it deliberately made life harder for its small business customers in order to shore up its own position in the wake of the 2008 financial crisis.
Files uncovered as part of a joint investigation between the BBC’s Newsnight programme and website BuzzFeed News suggest that RBS sought deliberately to refer small firms to its turnaround service, Global Restructuring Group (GRG), in a bid to boost profits and improve the state of the organisation’s balance sheet.
It is claimed that internal documents show the bank took every opportunity to refer small businesses to GRG with the aim of being able to charge them additional fees and higher interest rates. While GRG was supposedly set up to help struggling companies deal with potentially crippling financial problems, the files indicate that apparently healthy businesses were routinely referred to the division.
These firms then faced extra charges and fees which, in some instances, reportedly resulted in them ceasing trading or being bought out by RBS’s property division, West Register.
It’s claimed that the SMEs referred to GRG were typically those which had outstanding loans with RBS – and these loans were normally secured against property owned by the businesses. Because the value of this property had fallen as a result of the financial crisis, many borrowers found themselves in breach of their loan covenants, which stipulated that the assets used to secure the credit must be worth at least a certain proportion of the money borrowed.
RBS is said to have exploited these breaches to restructure the loans with much more punitive terms and conditions. But falling property values were not the only reason for businesses to be referred to GRG; RBS is facing allegations that some firms were earmarked for restructuring simply because they had said they planned to take their business to a rival bank.
The revelations from the BBC and BuzzFeed News follow a succession of investigations into events at RBS and GRG. A report by law firm Clifford Chance in 2014 found no evidence of wrongdoing at the bank, while a separate investigation carried out by City watchdog the Financial Conduct Authority has yet to be published.
In a statement, RBS told the BBC: “RBS has been very clear that GRG’s role was to protect the bank’s position. In the aftermath of the financial crisis we did not always meet our own high standards and we let some of our SME customers down.
“Since that time, RBS has become a different bank and significant structural and cultural changes have been put in place, including how we deal with customers in financial distress.”
The bank added there was no evidence that it “artificially distressed otherwise viable SME businesses or deliberately caused them to fail.”
Over the last few months of 2017 and the whole of January, client managers are busy reminding people of upcoming deadlines and things they’ll need to do to make it easy for them to keep on top of their Self Assessments.