RBS Global Restructuring Group and SMEs

Kate Green Excerpts

Thursday 18th January 2018 Commons Chamber

[Kate Green (Stretford and Urmston) (Lab)]

If we did not think before that there was a systemic crisis in banking, this debate has confirmed that there is.

The actions of the Global Restructuring Group have impacted on businesses and jobs in my constituency. I do not want to speak today about RBS’s past mistreatment of its customers; instead I will concentrate on the way that the bank continues, today, to behave towards the businesses it has damaged. Some businesses seeking redress from RBS may be able to access the compensation scheme that the bank announced last year, but for those unable to pursue that route, the only course is legal action.

It is pretty shocking to watch the extraordinarily aggressive approach that the bank is taking to litigation. Costs are escalated to such an extent that all but the richest litigants are unable to pursue their cases. Satellite litigation is launched against claimants’ funders, lawyers, and other third parties. Perhaps most shamefully of all, the bank has repeatedly been criticised for failing to provide full and frank disclosure in the courts during its defence of those claims. In 2016, in a well-publicised and ongoing dispute between Property Alliance Group, which is based in my constituency, and RBS, the bank was expressly criticised by Mrs Justice Asplin in the High Court for taking what she described as a “cavalier” attitude to disclosure. Last week, with the case now heading to the Court of Appeal, the court was again forced to order RBS to hand over more documents—clearly the bank has paid no heed to demands for disclosure. That is not an isolated case. LEXLAW has detailed other cases where RBS failed to provide full disclosure to the court and the claimant. That is clearly not how litigation should be conducted.

Equally, there are concerns about how the bank is operating the compensation scheme announced last year. At £400 million, the fund sounds generous, but in reality it does not come close to recognising the true extent of the harm caused to businesses or the benefit that RBS has enjoyed from GRG’s activities. The fund addresses only a limited range of GRG’s misconduct and is available only to a fraction of the businesses that suffered. Research carried out by Property Alliance Group suggests that the real size of RBS’s compensation scheme should be at least 10 times its current scale—closer to £4 billion than £400 million—and that is because one of GRG’s most heavily criticised practices was the process by which the bank bullied customers into giving away equity stakes in their business in return for its continued support. These so-called upside instruments have been criticised widely but were profitable, and if we look at the balance sheets and reports and accounts of the RBS subsidiary that managed the assets, SIG Holdings, we can see that the bank profited to the tune of £400 million from these practices. As will be immediately apparent, that £400 million, from just one area of the bank’s misconduct, equates to RBS’s entire compensation scheme, which covers all areas of misconduct.

What is more, the accounts of SIG Holdings for the year ending 2016 show that the bank set aside just over £40 million in practice for the costs associated with the complaints process and the automatic refund of complex fees to customers. Andrew Bailey, the chief executive of the FCA, told the Treasury Committee last October that RBS had paid or made offers of about £115 million, which is well short of the £400 million fund, and neither is it clear that the money has been either paid or accepted by claimants.

In conclusion, this debate does not just concern RBS’s past actions; it continues to do all it can to avoid its responsibilities. Far from rebuilding trust, the bank continues to treat its customers with disdain, both in the courts and in the operation of its compensation scheme.