RBS Global Restructuring Group and SMEs

Madeleine Moon Excerpts

Thursday 18th January 2018 Commons Chamber

[Clive Lewis]

I agree with my hon. Friend. During my time on the all-party parliamentary group on fair business banking and as a Back-Bench MP before that, I heard many similar stories of companies that had been forcibly distressed, or had been described as being distressed by the bank and then carved up like a Sunday roast.

[Mrs Madeleine Moon (Bridgend) (Lab)]

Will my hon. Friend give way?

[Clive Lewis]

I will continue.

As many Members will know, the stories keep coming, backed up by evidence. It is now clear that we are seeing not just a series of individual scandals, but a full, systemic failure that needs to be addressed by the House.

Let me now focus on how we can move forward. The APPG on fair business banking has identified a series of achievable and transformative objectives that will support our business community. My focus today, however, will be on dispute resolution, restitution, and the need for an independent financial services tribunal with the teeth that will enable it to tackle complex and, for the individuals involved, life-changing scenarios.

I want to touch briefly on the past, because it is important to separate the crises into two distinct phases. The first crisis, in 2007-08, was a crisis of liquidity. The second, which we are discussing today, is a conduct crisis that not only spans the financial services industry, but extends to the role of the professional advisers who are such an integral part of the system. They are Law of Property Act receivers, surveyors, accountants, insolvency practitioners and solicitors. They are all fundamental parts of this matrix, and I will return to them shortly.

The recent section 166 FCA report on RBS GRG concentrates on the years between 2008 and 2013, when banks were under extreme pressure to shore up their balance sheets. However, that behaviour did not spring up spontaneously. Senior banking insiders who worked in RBS between the mid-1990s and the crisis are clear that there was such a modus operandi in GRG for years before the liquidity crisis. Indeed, GRG and its predecessor, Specialist Lending Services, had been known as the “mortuary for businesses” since the late 1990s. During those heady days of liquidity, businesses might have had an opportunity to re-bank with competitors, but once the liquidity crisis hit, that was no longer an option Ever since then our business community has had to deal with the consequences, which have been ramped up to an industrial scale.

Although the title of the debate refers to RBS GRG, it is just a symptom of the underlying issues. In the course of the APPG’s work, it is hard to identify an institution that has not found itself at the centre of a conduct scandal, and I am sure that other Members will give many examples today. The APPG has come across similar instances among the major banking institutions. The HBOS Reading fraud, as a result of which bankers and their associates were jailed for a total of 47 years earlier this year, may seem easy to push aside as “a few bad apples”, but, in reality, it is a consequence of the same systemic failure.

--- Later in debate ---

[Mrs Madeleine Moon (Bridgend) (Lab)]

If we do not agree today that there is going to be justice for all those people who have been damaged by the banking crisis—by the illegal actions that have taken place across the banking sector and among the organisations that worked alongside the banks, including the valuers and surveyors—all the distrust of this House will be valid. It is in our power to give those people justice, and that justice must start today.

My constituent Mr Smith ran a small engineering company and had banked with NatWest for 12 years. He took out a £180,000 mortgage on a new building. He reduced the mortgage because his company was doing well; in fact, it was worth £220,000 fairly quickly. He decided to invest in new equipment to help him to expand. Unfortunately, when the bank agreed to fund the investment in new equipment, it put a second charge of £80,000 on his home, assuring him that it was not a problem because the bank would always negotiate with him if his company had any difficulty.

There were rumours that the bank needed money, so Mr Smith asked the bank manager whether things were okay, but he was assured that it was as safe as houses. As we know, though, the bank collapsed, and within weeks the flow of work into Mr Smith’s company also collapsed. A contract worth £30,000 was closed down literally overnight.

Mr Smith then had a problem with the Royal Mint, which was supposed to make a payment into his bank account on the Wednesday but rang at the last moment to say it would be made on the Thursday. Unfortunately, Mr Smith had arranged to pay suppliers on that same Wednesday. Instead of doing what it had always done previously, which was to act reasonably and say, “Don’t worry about it,” the bank charged him £600, adding to his financial problems.

The situation quickly became a huge problem for Mr Smith. He started to get phone calls from a few departments at the bank. [Interruption.] I am sorry about my phone ringing, Madam Deputy Speaker! In fairness, it did seem like it was RBS calling. The bank was calling Mr Smith to ask him to come in to discuss his loans. That was when he entered the GRG bracket. In the end, he was forced to close his business.

Despite Mr Smith’s attending court on numerous occasions and being a litigant in person, RBS often did not send people, or appeared badly prepared. It was only when I finally managed to get through to the bank and criticised its actions that it agreed to a meeting with Mr Smith. The bank actually said to Mr Smith’s wife, “It is not a matter of if we will take your home, but when.”

Mr Smith and his family have gone through hell. Like many of the companies that have been discussed in the debate, they would have been a cornerstone of Britain’s economic recovery. Instead, trust, confidence and belief in the British banking system has been systemically destroyed.