RBS Global Restructuring Group and SMEs

Jeff Smith Excerpts

Thursday 18th January 2018 Commons Chamber

[Jeff Smith (Manchester, Withington) (Lab)]

In the brief time available, I will add my voice to that of those calling for a proper inquiry into the scandal and a proper tribunal system for dealing with SMEs that are in difficulty.

I wish briefly to cite the example of my constituent Anthony Molyneux, whose small business has been mishandled by RBS over the past several years. Equally—as we have heard, this is a much wider problem—I could cite the case of my constituent David Farnden, who has been treated appallingly by the Yorkshire Bank over a long period of time.

Mr Molyneux’s experience is one of the thousands of cases in which RBS has put its profits before small businesses that needed, expected and deserved its support to turn their businesses around. He estimates that at least £1.5 million of assets were sold for around £260,000 to make a quick buck for RBS. The problem started when he was alerted by one of his tenants that an auction sign had been placed outside one of his premises. The auctioneers confirmed that RBS had placed his premises up for auction to pay back some of the debt that it claimed he owed.

RBS did not follow the correct processes when it used the TR2 process in the sale of Mr Molyneux’s land. It did not communicate properly with him and did not give him adequate opportunity to clear his arrears. After a long dispute about the amount he owed, he got an agreement in writing, and then RBS came back demanding more money.

I do not have time to go into the long list of very serious concerns about the process and ethics of the sale, suffice it to say that Mr Molyneux took his case to the financial ombudsman, which upheld his complaint. It recognised wrongdoing on the part of RBS, but said that, in the absence of the loan agreement that RBS said could not be found, it would be for the courts to decide the legality of the bank’s actions. That left the onus on Mr Molyneux to undertake a very expensive and risky court process. Six years on, the issue has not been settled, and he has not had an adequate settlement for his dispute. Sadly, that case is typical of the kind of failings revealed in the FCA’s report on RBS.

It is clear from this debate that small businesses across the country have suffered as a result of a system that lacks adequate checks and balances. The incidents are not isolated, as we have heard. Sixteen thousand companies were handled by the GRG. Of those, only one in 10 ever returned to health and, at the same time, the GRG became one of the bank’s most profitable sectors. We have heard that there has been a systemic failure. The banks have failed to recognise and grasp the glaring conflicts of interests between their commercial aims and their obligations to businesses and all of us to help SMEs to turn around and make a profit.

It is clear from this debate that my constituent’s experience is one of many examples in which SMEs have been the victims of a banking sector that is focused solely on profit, not on supporting its customers or our wider economy. It is also clear that the financial ombudsman is unable effectively to provide for accountability in cases such as the ones that we have heard about today. It lacks the power or authority not only to prevent such examples of corporate greed, but to achieve justice for those affected. In the wake of the FCA report, which has exposed a widespread failure in the system, the Government must take action, so I strongly call for a Select Committee inquiry—a proper inquiry—and a proper process to bring RBS and the other banks to justice on behalf of my constituents and those of other Members.