Royal Bank of Scotland has been in hot water with regulators for years following allegations that the U.K. bank profited by pushing its small business clients into its Global Restructuring Group (GRG), allegedly imposing high fees and often forcing those SMEs into financial ruin.
The saga hit what may turn out to be its pinnacle this week when RBS revealed it would allocate nearly $500 million to repay to its small business customers. The bank’s chief executive, Ross McEwan, also apologized to those SMEs.
“We have acknowledged for some time that mistakes were made,” he said in a statement Tuesday (Nov. 8). “Some of our customers went through what was a traumatic and painful experience as a result of the crisis. I am very sorry that we did not provide the level of service and understanding we should have done.”
He also accepted the final verdict of the Financial Conduct Authority (FCA), which found wrongdoing by the GRG in how it handled its small business customers. According to the FCA’s decision, 12,000 small businesses landed at GRG, though just 4,000 were not viable. The majority of businesses in the unit suffered “some form of inappropriate action by RBS,” the FCA declared, though added that the mistreatment led to financial distress in a minority of cases.
According to reports, RBS is reviewing whether to withhold bonuses from current and former executives involved in the GRG, and the FCA has yet to publish its full, final decision on the matter.
Reports by Forbes this week highlighted the low cost of the scandal for the bank, which led the banking industry and its analysts to be relieved. But small business backers are questioning whether RBS will be held adequately accountable for its actions.
“We remain deeply concerned that thousands of small business owners the bank was entrusted to support did not receive help and many lost their livelihoods,” said the Federation of Small Businesses National Chairman Mike Cherry in the wake of RBS announcing its payout to small businesses, which will be paid out to SMEs that paid charges to GRG between 2008 and 2013. The small businesses will also be allowed to lodge new complaints regarding that time period and their experience with the bank.
Cherry added that he believes small businesses should see an apology by RBS.