RBS to Compensate Small-Business Customers
November 08 2016 - 3:20AM
Dow Jones News
By Max Colchester
LONDON-- Royal Bank of Scotland Group PLC said Tuesday it was
setting aside 400 million pounds ($496.2 million) to compensate
customers who were allegedly pushed into default by the bank's
restructuring unit.
The bank acknowledged that in some areas it could have done
better for small-to-medium enterprise customers in its Global
Restructuring Unit. Specifically, it said the bank could have
managed the transition to GRG better and should have better
explained to customers any changes to the prices or complex fees it
was charging.
"The bank accepts that it didn't always communicate as well or
as clearly as it should have done. The bank also didn't always
handle customer complaints well," it said.
The decision to compensate customers marks a change in tactics
for RBS, which spent years denying it had mistreated customers.
Several small businesses and government adviser alleged that
RBS's Global Restructuring Group unit regularly forced business
customers to default on loans so that the bank could charge higher
fees or seize their properties and sell them.
RBS has repeatedly denied this and commissioned law firm
Clifford Chance to investigate the allegations. The report said
that RBS didn't systematically defraud customers. The Financial
Conduct Authority is conducting its own probe into the matter which
it is expected to publish in the coming months.
After the financial crisis the number of customers being
referred to RBS's GRG unit rose. A report commissioned by the bank
on its business lending found that fewer than 10% of businesses
referred to the GRG unit end up in bankruptcy. But its author,
former Bank of England Deputy Governor Andrew Large, warned of
potential conflict of interest at GRG because it selects the
struggling businesses it works with from RBS's larger base of
customers, and aims to generate a profit.
RBS closed both GRG and its West Register unit, which both
advises distressed businesses on property matters and bids for
their properties.
RBS is 73%-owned by the U.K. government, after it rescued the
bank with GBP45.5 billion of taxpayers' money in one of Europe's
biggest bank bailouts amid the financial crisis. The value of that
stake has fallen sharply since the 2008 rescue and the vote to
leave the European Union.
Write to Max Colchester at max.colchester@wsj.com
(END) Dow Jones Newswires
November 08, 2016 03:05 ET (08:05 GMT)
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