On Sunday’s Radio 4, Lord Vince Cable asked why the FCA had still not published its report into the alleged mishandling, by the Royal Bank of Scotland (RBS), of Small and Medium-sized Enterprises during the financial crash of nine years ago.  The complaint, in essence, was the classic one that large British banks lent umbrellas to small business customers when the sun was shining and then took them away when in rained.  More specifically, it was alleged that RBS pushed customers towards insolvency through, e.g., selling them inappropriate products and/or revaluing the businesses, and then transferred them to the “care” of their Global Restructuring Group (GRG) whether they wanted that or not.

GRG had two objectives: “turnaround” and “commercial”, i.e. making as much money out of the situation as possible.  It was alleged they did this, in part, by forcibly acquiring customers’ assets cheap and selling them dear.  RBS has since recognized that these objectives were in conflict and, they claim, now supervises to ensure fair play.  Quite how it does, or even could, do that is opaque.

In January 2014, the FCA appointed the Promontory Financial Group to investigate the extent of the abuse.  Promontory, now owned by IBM, reported to the FCA in 2016.  The FCA published its own summary of the Promontory report in November.  How that differs, if it does, from the original is not clear but it is an odd document.  On the one hand it reads like a whitewash, playing down the admitted abuses, but then remarkable admissions crop up.  For example:

• “the failure to support SME businesses in a manner consistent with good turnaround practice;
• placing an undue focus on pricing increases and debt reduction without due consideration to the longer term viability of customers;
• the failure to document or explain the rationale behind decisions relating to pricing following transfer to GRG;
• the failure to ensure that appropriate and robust valuations were made by staff, and carrying out internal valuations based upon insufficient or inadequate work – especially where significant decisions were based on such valuations;
• the failure of GRG to adopt adequate procedures concerning the relationship with customers and to ensure fair treatment of customers;
• the failure to identify customer complaints and handle those complaints fairly”.

Two thirds of customers transferred to GRG were in fact viable and “most of them experienced some form of inappropriate action by RBS. However, the Report also concluded that, in a significant majority of cases, it was likely that inappropriate actions did not result in material financial distress to these customers.”   That does not sound like a ringing endorsement to me nor does it match up with the media reporting of RBS/GRG management actions during this period.

But why has the Promontory Report still not been published six months on, nor the FCA’s own report?  The FCA seems to have plenty of time to hound the little guys, like individual Financial Advisers, but none to uncover a potential scandal concerning one of the country’s biggest national institutions.

Finally, there is another possibly innocent but still intriguing aspect of the FCA’s long grass strategy: the role of Margaret Cheever. Ms Cheever was a Managing Director of RBS during the period under review, responsible for Banking Credit Policies and Practices and Corporate and Institutional Banking. She left to become, guess what, a Director of Promontory.  Obviously she may well have had nothing to do with any of this but it would be good for that issue to be clarified not least because conflicts of interest lie at the heart of this matter.