Special Report: Why RBS may pay small firms it allegedly ruined

Wed Sep 23, 2015 7:25am EDT
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By Matt Scuffham

LONDON (Reuters) - One morning in May, the chief executive of Royal Bank of Scotland, one of Britain's biggest banks, called together his senior executives for an urgent briefing. Ross McEwan had just attended a meeting with officials at the financial regulator and had important news. 

"I think they've found something," he said, according to three sources with direct knowledge of the meeting.

McEwan was referring to the regulator's investigation into claims by customers that RBS, once a colossus with a balance sheet nearly twice the size of the British economy, had deliberately pushed small businesses to bankruptcy so it could pick up their assets cheaply.

For three years, the bank has vigorously denied the allegations about its Global Restructuring Group (GRG).

But the meeting at the Financial Conduct Authority (FCA) convinced McEwan outright denial was no longer an option, according to insiders. Now, they say, the 300-year-old lender is considering a compensation scheme for small firms – from tyre makers to nursing home operators – which say GRG abused them or forced them out of business. 

The cost to the bank, rescued during the financial crisis by British taxpayers, could run to billions of pounds. But bank executives hope the step might help draw a line under the mounting tally of blunders and alleged wrongdoing which has dogged RBS since 2007, crippling its reputation, impeding its recovery and delaying government plans to re-privatize it.

Of the many scandals that have entangled RBS in recent years, executives say McEwan feels the GRG allegations have been most damaging. McEwan, who became chief executive at RBS in 2013, is trying to refocus the bank. He has closed or sold its investment banking operations and wants to place small-business customers at its heart, recasting it as a predominantly domestic lender that supports Britain's economy.

Asked to comment on the bank's plans, Jon Pain, RBS's Chief Conduct and Regulatory Affairs Officer, said the bank is cooperating with the regulatory investigation. "We have no plans for any redress scheme in relation to this matter," he added.    Continued...

A logo from a Royal Bank of Scotland (RBS) branch is seen reflected in a window in the City of London, Britain, in this March 6, 2013 file photo.  REUTERS/Toby Melville/Files