RBS Global Restructuring Group and SMEs

Neil O'Brien Excerpts

Thursday 18th January 2018 Commons Chamber

[Neil O'Brien (Harborough) (Con)]

I welcome this important debate and congratulate the hon. Member for Norwich South (Clive Lewis) on securing it.

I am conscious of following a very powerful speech. I think Members on both sides of the House will be horrified and sickened by the contents of the RBS memo, and I congratulate members of the Treasury Committee on putting it in the public domain. Gloating and cruel, it is a symbol of a profoundly sick culture within that bank. To give RBS its due, let me say that I welcome its £400 million compensation fund and the complaints procedure presided over by a former judge, but there is still a long way to go. Sadly, as a number of hon. Members have pointed out, the issues raised by RBS are not confined to that bank. The solutions we need are industry-wide.

One of my constituents had an experience with HSBC of exactly the same kind as those experienced in RBS cases. His lighting business had a cash-flow problem, which was no fault of his—indeed, it was partly the fault of the bank for authorising a payment which he did not believe could be authorised. His secured loan was turned into an overdraft and then he was offered a nine-year sustainable loan to work out of the debt, on the condition that he first paid a one-year loan without being chased for it. He did that—he did all the right things—but the nine-year loan was never forthcoming; instead he was offered a series of one-year loans at increasingly high interest rates, with increasingly high charges. In effect, he was made to work on an ever-faster-moving treadmill just to stand still. This was a perfectly viable business and a very hard-working man who has done a good job. In 2014, the financial ombudsman finally ruled against HSBC, saying that it should restructure the loan on the original terms that he had been offered and repay all charges made.

There are two disturbing aspects of this case. The first was the bank’s fundamental approach to this small business: this was not relationship banking and it was not an attempt to build a company over the long term; it was an attempt to sweat it for everything it was worth and to push it towards bankruptcy. The second and even more disturbing aspect was the bank’s response to the ombudsman’s ruling: instead of complying with the clear spirit of that ruling, the bank seized on an imprecision in the ruling to try to retrospectively force a much more onerous loan on to my constituent. After a second successful appeal to the ombudsman, the bank will still only offer my constituent a loan on far more onerous terms. As a result, nine years on, he is still in dispute with the bank. His life is on hold and his home is under threat, but despite everything he has managed to keep the business going—good on him, but it is not thanks to HSBC.

For victims of RBS GRG and other banks, we need a profound change in the culture of small business lending in Britain. I agree with many of the suggestions that other hon. Members have made. We need an ombudsman or regulator that banks are more frightened of, with stiffer penalties and clearer, quicker and more specific remedies. Since 2010, we have made real progress in reforming the banking sector: we have replaced the tripartite system that failed so spectacularly; we have seen the Vickers report and the ring-fencing of retail banks from investment banking; we have ended “too big to fail”; we will see bankers stand trial next year for their role in the financial crisis; we have introduced higher capital requirements and safer banking measures to increase competition and encourage challenger banks; we have the new open banking, the tougher bank bonus clawback regime and the bank levy. Despite all the good work that has been done, there is still a lot to do. The next reform made by the Treasury must be to put in place a stronger regulator and ombudsman, and to secure justice for our small businesses.