The Royal Bank of Scotland, or RBS, has been in hot water for months as U.K. authorities investigate the institution’s banking practices following claims that it squeezed its SME customers into its Global Restructuring Group (GRG) unit in an effort to charge them higher interest fees.
A special report by Reuters released on Wednesday (Sept. 23), which details the scandal from its beginnings, suggests that RBS may look to repay some of the small businesses that were allegedly driven to bankruptcy by the bank’s practices.
[bctt tweet=”RBS may repay the small businesses allegedly driven to bankruptcy by the bank.”]
Claims first surfaced years ago that RBS mistreats its small business banking customers through unfair practices and higher fees at its GRG. According to reports by Reuters, while the bank’s chief executive, Ross McEwan, had adamantly denied the allegations, a meeting with the Financial Conduct Authority (FCA) led him to lower his shields.
According to unnamed sources, McEwan is considering going so far as to financially compensate the small businesses that accusers say were led to bankruptcy by the bank’s practices.
Reports said that if this compensation were to occur, it could cost RBS billions of dollars.
But reports also said that RBS may be looking to regain some of its lost reputation. One senior executive at RBS had previously told reporters that the saga has amounted to one of the most damaging scandals for the bank in its 200-year history. Reuters reported that McEwan himself agrees.
[bctt tweet=”The saga has amounted to one of the most damaging scandals for RBS in its 200-year history.”]
Plans to repay small businesses are not assured, however. In a statement to reporters, RBS Chief Conduct and Regulatory Affairs Officer Jon Pain said the bank has “no plans for any redress scheme in relation to this matter.”
RBS hired internal investigators to look into the allegations last July.
The unnamed sources confirmed to Reuters that no solid plans to repay SMEs have been made, but that in recent months the bank has had a change in its approach to battling the claims and protecting its reputation.
As U.K. federal financial investigators continue their probe into the Royal Bank of Scotland’s small business banking practices, new reports say the financial institution is launching an inquiry of its own into the matter.
Unnamed sources said RBS has hired third-party advisers to examine the bank’s treatment of small business clients as it continues its internal investigation of the matter, Business Recorder reports said on July 23.
The Financial Conduct Authority has been probing RBS for nearly a year following claims that the bank mistreated its small business customers, squeezing them out into its Global Restructuring Group division in order to charge them higher interest and other fees. According to senior executives at the firm, the claims have been some of the most damaging to RBS’ reputation.
The decision to hire outside help with its investigation was for the purpose of identifying potential inconsistencies with the probe taken on by the FCA, the unnamed source said. “It’s to provide the board with confidence RBS is getting to the bottom of this.”
New allegations hit RBS last May that the bank forced its small business loan borrowers to default to reduce RBS’ exposure and lessen regulatory burdens placed on the institution for lending to small businesses in the first place. The Times published the claims in an article following its own investigation of the matter, concluding that RBS “piles on fees, revalues property that loans are secured against, triggers defaults and takes over assets” when dealing with small business borrowers through its Global Restructuring Group.
“Squeezing thousands of business customers who might have thrived had they been given the support they were promised appears to be an unintended consequence of the desire to make banks safer,” the paper added.
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More