RBS to compensate Business Customer

Royal Bank of Scotland is to compensate small business customers it is accused of secretly trying to profit from.

The bank has announced a fund of £400m for affected firms.

Its Global Restructuring Group (GRG) had been accused of buying assets cheaply from failing firms it claimed to be helping.

However, the Financial Conduct Authority (FCA) found RBS did not "artificially engineer" the transfer of customers to GRG.

Last month, RBS said it had let some small business customers down in the past but denied it had deliberately caused them to fail.

'Very sorry'

On Tuesday, RBS chief executive Ross McEwan 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."

The bank will automatically refund complex fees paid by small business GRG customers between 2008 and 2013, and will set up a new complaints process.

In 2014, the FCA commissioned a review of the work of GRG.

On Tuesday, the FCA said it found there was no widespread practice of transferring customers to GRG for their value, or requesting cash injections when the bank had no intention of supporting the business.

However, the bank did fail to support businesses "in a manner consistent with good turnaround practice", including "placing an undue focus on pricing increases and debt reduction without due consideration to the longer term viability of customers".

RBS's announcement coincides with the appearance before the Treasury Select Committee of Andrew Bailey, FCA chief executive.

A report three years ago by the government's then entrepreneur in residence, Lawrence Tomlinson, accused the taxpayer-owned bank of deliberately putting viable businesses on a path to destruction while aiming to pick up their assets on the cheap.

The allegations were supported by a cache of documents, passed by a whistleblower to BuzzFeed News and BBC Newsnight last month.

The documents confirmed that bank staff were rewarded with higher bonuses based on fees collected for "restructuring" business customers' debts - cutting the size of their loans and getting cash or other assets from the customer.

'Customers let down'

In what was described by an RBS executive as "Project Dash for Cash", staff were asked to search for companies that could be restructured, or have their interest rates bumped up.

Last month, the bank told Newsnight: "RBS has been very clear that GRG's role was to protect the bank's position... In the aftermath of the financial crisis we did not always meet our own high standards and we let some of our SME customers down.

"Since that time, RBS has become a different bank and significant structural and cultural changes have been put in place, including how we deal with customers in financial distress."