The Royal Bank of Scotland's (RBS') chief executive is calling on U.K. regulators to introduce stricter small business (SMB) lending regulations, claiming that lax regulatory oversight is what allowed RBS to avoid punishment after a watchdog found the financial institution (FI) had unfairly treated small business customers of its Global Restructuring Group (GRG). According to City A.M. reports on Tuesday (Oct. 9), RBS CEO Ross McEwan spoke with the Press Association about the current small business lending landscape.
"I think somebody needs to be there to put a second view around the [SMB] marketplace," he said. "Some sort of regulation around that seems to be needed."
The remarks follow the U.K.'s Financial Conduct Authority (FCA) review of RBS' Global Restructuring Group unit, which was found to have treated small businesses unfairly, with some SMB owners claiming the unit pushed them into bankruptcy. Even with the FCA's findings, however, RBS did not face fines or other punishment. In July, the FCA pointed to "very limited" powers to impose such sanctions.
"It is important to recognize that the business of GRG was largely unregulated and the FCA's powers to take action in such circumstances — even where the mistreatment of customers has been identified and accepted — are very limited," said FCA Chief Executive Officer Andrew Bailey at the time.
It garnered frustrated reactions from some, including Conservative MP Nicky Morgan, head of the Treasury Committee, who called the decision "disappointing and bewildering."
"The government should stand ready to introduce any legislation required when it sees the outcome of current reports on redress, and should also urgently consider what additional powers the FCA requires to act in cases such as GRG," Morgan said in July.
In August, small business lobbying group SME Alliance said it would launch its own investigation into GRG in an effort to explore how to hold the FI accountable for the misconduct. Separate reports in Insider.co.uk noted that RBS' McEwan did not clarify whether he believes the FCA or another watchdog should obtain responsibility for such regulatory oversight.