8 Nov 2016

RBS: what now for the troubled bank?

Many would see today’s headlines and sigh. RBS forced to put aside another £400 million in compensation for past bad behaviour. This time, the conduct of its Global Restructuring Group, or GRG, during the financial crisis.

But in truth, a £400 million bill could be the best outcome they could have hoped for. Because what was at stake was much, much higher.


RBS had been charged with deliberately distressing small businesses as it desperately sought to shore up its own finances at the height of the credit crisis. Accused of bolstering its own cash pile by intentionally pulling the plug on others.

Yet today that most serious charge – which would have amounted to intention to defraud – has been laid to rest by the Financial Conduct Authority. RBS did not “set out to artificially engineer a position…to facilitate a transfer of a customer to GRG.”

All small and medium businesses that went into GRG showed some signs of distress, it concluded. And while two thirds of the 12,000 customers who were put into GRG did suffer some form of “inappropriate action”, those actions did not result in material financial distress to these customers.

Slightly complex language but distilled, RBS is largely off the hook.

Yes there was lots of bad behaviour (the FCA’s charge sheet makes for grim reading) but none of it was deliberate and in the “significant majority” of cases, the bad behaviour didn’t do those businesses any serious financial harm.

Dozens would disagree. We’ve spoken to numerous businesses over the years. People who claim they had never defaulted on a single payment but who found themselves in GRG, suddenly facing millions of pounds worth of fees, higher interest rates and crippling new credit agreements. They would say they were caused extreme financial harm but the FCA has essentially found against them.


Yes, RBS has set up a £400 million compensation fund. So all those made to pay complex fees to GRG will be automatically reimbursed. RBS says that amounts to about £200 million of the total. A further £100 million will be spent to set up a complaints hotline, which customers can use to make their case for more compensation to the bank.

But doing the maths that only leaves £100 million for potential pay outs. Not exactly much considering one high profile GRG victim, Neil Mitchell, is himself suing the bank for over £100 million.

The question is how many of the small and medium business will have the gumption to complain. Many are cynical that RBS has been left to run the complaints process itself, although much was made today about an independent oversight committee led by a former high court judge.

So if RBS turns down your claim for compensation, you can appeal. But given the number of times the RBS boss cited the FCA findings today, it will certainly make it much harder for those appeals to succeed.

In a statement Ross McEwan, CEO of RBS said:

“We have acknowledged for some time that mistakes were made. Some of our customers went through what was a traumatic and painful experience as a result of the crisis. I am very sorry that we did not provide the level of service and understanding we should have done.”

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