RBS review finds no evidence of fraud

THE Royal Bank of Scotland says that an independent review has found no evidence it set out to defraud its business customers.

RBS appointed law firm Clifford Chance to undertake a thorough and independent review of the allegations made by Yorkshire businessman Lawrence Tomlinson in his damning report which claimed that RBS treated British businesses in an “unscrupulous” and “shocking” way. However, he never accused the bank of fraud.

The Yorkshire entrepreneur and founder of Leeds-based LNT Group which includes sports car brand Ginetta and has interests including care homes and software, was appointed as an ‘entrepreneur in residence’ at the Department for Business, Innovation and Skills earlier last year, with a remit to look at smaller firms who struggle to access bank finance.

Clifford Chance concluded that there was no evidence to support the allegations. 
RBS also announced a range of actions to ensure that it can enhance its support for SMEs when they get into financial trouble.

In compiling the report Clifford Chance interviewed 138 small business customers in the recovery unit, 45 employees and reviewed 130 files, comprising 400,000 pages and 1,200 documents. 

Ross McEwan, RBS CEO, said: “The trust that a bank has with its customers is fundamental. That trust was put at risk at RBS by the allegation of systematic abuse made in the Tomlinson report. I welcome the Clifford Chance findings which show no evidence of the serious and damaging allegation that we had set out to deliberately defraud our business customers.

“This allegation had a profound effect on the bank and on the work of a team that successfully turns round the vast majority of businesses that it works with. We could not let this allegation hang over us. That’s why we acted quickly to appoint Clifford Chance to get to the truth of this claim. We are determined to earn back the trust of our customers.

“Following the reckless lending that led up to the financial crisis, the bank’s shareholders and customers lost billions of pounds on bad loans. The bank, through its restructuring team, helped minimise those losses where it could, successfully turning round thousands of businesses, safeguarding hundreds of thousands of jobs. This required the bank to make incredibly difficult decisions, but our first priority then and now is to try and help our customers recover.”

Jon Pain, chief conduct and regulatory affairs officer, said Clifford Chance was given full access to all the files, paperwork and people they requested to see within the bank.

He said: “They looked extensively into over a hundred SME customer cases. Inevitably, given the sheer number of cases we have worked with, some questions and issues were identified and we learn lessons from these, but there was no evidence to support the most serious allegation or any other evidence of misconduct.  Dealing with customers in financial distress is one of the most difficult things in banking. We will continue to do everything we can to improve the experience of those businesses that get into trouble.”

In response to the Clifford Chance report, RBS said it would wind down and sell any assets in its property division, West Register.

Tomlinson said although delayed from the original publication date in January, he is glad Clifford Chance has taken a couple of extra months to carefully consider the volume of evidence they received but said “it is unsurprising they have not found any clear evidence of fraud, which is not something I have ever accused the bank of”.

“I am struggling, however, to understand headlines that the Clifford Chance report gives RBS a clean bill of health as their broader findings around the lack of fee transparency, lack of adherence to mandatory rules for internal valuations and need for an improvement in the business culture of GRG tally with the central themes of the Tomlinson Report and the patterns of behaviour I witnessed,” Tomlinson added.

“It’s important to note that Clifford Chance did not investigate or reach conclusions on areas such as the validity of valuations and treatment of businesses.”

Tomlinson said he welcomes RBS’ decision to waive default interest for 90 days and wind down West Register, as he previously suggested. 
 
“I look forward to the FCA publishing their findings later this year as their scope is much more robust, far reaching and, of course, independent,” he added.

RBS said it will cooperate fully with the on-going FCA inquiry, which is looking at all aspects of how the bank works with distressed businesses, and said it will ensure that the Clifford Chance report is available to the FCA for their investigation. RBS has also commissioned a review for Ulster Bank customers in the Republic of Ireland into this same allegation.

The report found some cases where customers felt the bank’s fees lacked clarity and that although no evidence was found, a handful of customers made allegations around the behaviour of RBS staff. RBS said it is thoroughly investigating these cases and is clear that it will not tolerate such behaviour.

RBS is also setting out further steps to rebuild trust with its customers. These measures build on changes made in response to the findings from the Sir Andrew Large review. For example, the bank has stopped the so called “double handover” where a customer used to get a new relationship manager when they first need support and then another relationship manager on entering the restructuring unit.

 

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