The chair of the Commons Treasury committee has written to the banking regulator to demand proper compensation for the “many businesses” harmed by Royal Bank of Scotland during the recession.
Andrew Tyrie sent letters to the Financial Conduct Authority (FCA) and RBS yesterday raising concerns about the adequacy of a compensation scheme set up in the wake of a BuzzFeed News and BBC Newsnight investigation that revealed how the bank crushed thousands of British firms for profit.
Tyrie said he expected the regulator to be “extremely alert” to whether RBS was reimbursing businesses fairly for their losses and asked whether the £400 million the bank had set aside for the scheme was an “underestimation” given the scale of the damage caused. He pointed out that business groups had asked for the bank to pay out £2 billion in compensation.
RBS announced its compensation scheme weeks after a cache of thousands of secret documents obtained by BuzzFeed News revealed the secret policies under which firms were pushed into the bank's troubled-business unit, Global Restructuring Group (GRG), which chased profits by hitting businesses with massive fees and fines and snapping up their assets at rock-bottom prices.
The internal documents starkly contradicted the bank’s public insistence that GRG acted as an “intensive care unit” for ailing firms that was tasked with restructuring their loan agreements to “help them back to health”.
Ross McEwan, the bank’s chief executive, finally admitted last month that GRG had put some small businesses through a “traumatic and painful experience” during the financial crisis and announced that RBS had set aside £400 million for compensation payouts, but he insisted there was no evidence GRG had deliberately driven healthy businesses into distress in order to make a profit.
The compensation scheme was immediately branded “wholly inadequate” by victims, and the FCA was accused of a “whitewash” after announcing the same day that it lacks the power to take action against the bank. The City watchdog said a long-delayed inquiry had found evidence of “systematic” mistreatment of small firms by GRG but said its powers to intervene were “limited”.
Tyrie’s letter to the FCA demanded “reasonable treatment for the many businesses that have been at the wrong end of RBS’s Global Restructuring Group’s bad practice”. He said it was a “step forward” that the bank's compensation scheme would be independently overseen by a retired High Court judge, but said “more detail on the design of the scheme is needed to provide confidence to businesses that lost out to GRG” and called on the regulator to publish the report on its inquiry in full.
In particular, Tyrie raised concerns that businesses are not to be allowed direct contact with the independent reviewer, Sir William Blackburne, and asked the bank why the retired judge is only looking at claims for excessive fees charged by GRG but not consequential losses resulted from its heavy-handed tactics.
The committee chair also asked the regulator how it would ensure that any compensation paid to businesses that have gone into liquidation goes directly to the owners rather than the administrators.
Heidi Blake is the UK investigations editor for BuzzFeed News and is based in London.
Contact Heidi Blake at email@example.com.
Richard Holmes is an investigations reporter for BuzzFeed News and is based in London.
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