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June 13, 2019

FCA expands on decision to bring no charges in final RBS GRG report

The Financial Conduct Authority has published its full report into the RBS GRG scandal, expanding on its reasoning to not press charges.

By Christopher Marchant

The Financial Conduct Authority has published its full report into the RBS GRG scandal, expanding on its reasoning to press no charges against the institution.

An FCA-commissioned report released by the regulator in November 2017 identified “undue focus” on Global Restructuring Group’s (GRG) income at the expense of SME customers’ viability, as well as inadequate oversight of pricing practices. There were individual reports of businesses entering insolvency that could have been saved if GRG had adopted more responsible practices, as well as systemic overcharging on already strained businesses.

This was followd by the decision in 2018 for the FCA to take no action against the institution or its employees, because it does not have the appropriate disciplinary or investigative powers to address past misconduct in the division.

In the final report released today, the FCA confirmed that it found systemic and widespread inadequate conduct within GRG, and that it fell short of the standards its customers expected.

In its reasoning to not press charges, the FCA also sought to place the actions of GRG from 2005-2013 in context:”RBS was under unprecedented stress as a consequence of the severe errors made by former management in the years leading up to the financial crisis [of 2007-8], the failure of the firm and its receipt of government support. Management was tasked with dealing with this legacy at a time when general economic conditions had caused a severe downturn and consequent problems for many firms leading to a major increase in the number entering GRG.”

The final report also restated its reasoning from its 2018 statement, regarding that most of GRG’s activity was outside the scope of financial conduct regulation, and the FCA’s powers to take action in such circumstances, even where the mistreatment of customers has been identified and accepted, was limited. The report also noted that commercial lending of this kind remains unregulated in the UK presently.

In light of the RBS GRG scandal, the FCA has said it will push forward with granting SMEs access to its dispute resolution arm, the Financial Ombudsman Service (FOS), which is currently available for companies with ten employees or less.

Andrew Bailey, FCA chief executive said: “GRG has been highly damaging for those customers impacted and more widely for the reputation of the banking industry. Combined with other issues that have impacted SME’s it is important for all who work in this sector to regain the public’s trust.

“I must acknowledge the distress felt by many of GRG’s customers. The firm’s relations with its customers were often insensitive, dismissive and sometimes too aggressive; these failings made an already stressful situation worse. I know that many customers of GRG therefore disagree with our decision to not take enforcement action, but I hope that this report will explain why we reached that decision.”

In January it was reported by the BBC the documents show the HM Treasury’s Asset Protection Agency influenced Global Restructuring Group (GRG)’s strategy and aggressive SME lending practices.

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