The Royal Bank of Scotland (RBS) will not face enforcement action by the U.K. Financial Conduct Authority (FCA), according to Reuters reports on Tuesday (July 31).
The publication said the FCA is not taking action against RBS for its Global Restructuring Group’s mistreatment of small business customers. Lawmakers have slammed the watchdog for its decision, but FCA Chief Executive Andrew Bailey said the regulator’s powers are limited.
“After carefully considering all the evidence, we have concluded that our powers to discipline for misconduct do not apply and that an action in relation to senior management for lack of fitness and propriety would not have reasonable prospects of success,” said Bailey in a statement.
In response, lawmakers are calling for change in financial regulation, particularly in how watchdogs can address misconduct in small business lending.
Treasury Select Committee Chair Nicky Morgan said the FCA’s inaction “demonstrates the need for a change in how lending for SMEs is regulated.”
“The government should … urgently consider what additional powers the FCA requires to act in cases such as GRG,” she added.
While the FCA’s review of allegations against GRG did not find evidence that RBS transferred viable small firms to GRG in an effort to profit from restructuring or insolvency, it did “identify that many aspects of GRG’s culture, governance and practices were deficient, and that in some areas the inappropriate treatment of customers was widespread and systematic,” the watchdog said in its review.
Bailey emphasized that the FCA’s inability to take action is not a show of approval for GRG or RBS practices.
“We expect high standards from the firms we regulate, and RBS fell well short in its treatment of GRG customers,” he said.
Regulators’ handling of the RBS scandal has received criticism from multiple angles. Earlier this year, the FCA was criticized for its decision not to publish its full report on its RBS review; in response, MPs decided to publish the report following a leak of some of its contents.