26 Oct 2018
RBS small business unit issued warning by MPs
The Treasury Committee has publicised that an “overwhelming majority” of RBS bankers, who worked in the controversial Global Restructuring Group (GRG), have remained employed in the bank’s new restructuring division.
In the 64-page report published by the committee, on small business finance, they discussed how GRG had carelessly destroyed the livelihoods of many, in pursuit of profits.
RBS’s decision to keep those members of staff on board would “seriously undermine RBS’s claim that the bank’s culture has changed fundamentally in recent years,” said the committee. Adding that it “raises concerns that the bank has merely undertaken a rebranding exercise.”
The Financial Conduct Authority (FCA) had investigated GRG after increasing concerns with regards to the company artificially distressing and transferring otherwise viable small businesses to profit from their restructuring or insolvency.
However, the regulator concluded that its activities fell outside its remit.
Chairman of the committee, Nicky Morgan, said small businesses found themselves in a “regulatory black hole” and recommended for disputes between themselves and their financial services providers to be handled by creating a special tribunal.
“The Treasury should bring commercial lending inside the regulatory perimeter, allowing the introduction of a regulatory regime that adequately protects SMEs”.
On top of the warnings on RBS, the committee made broader interpretations on the hesitancy of small and medium-sized enterprises (SMEs) to look for external finance, because of the fear of having loan applications rejected and a lack of trust in lenders.
Moreover, they found that SMEs are often unaware of the funding options that are available to them, which further results in an “unwillingness to apply for finance”.
In their report, the committee said:
“The Treasury should conduct or commission work to identify why this attitude is commonplace amongst SMEs and develop a strategy to ensure the UK’s small businesses have the confidence to seek the external finance that is right for them.
“Efforts should also be made to ensure SMEs are aware of the options available to them if they are turned down for finance; specifically, the Lending Appeals Process and the Bank Referral Scheme.”