Royal Bank of Scotland (RBS) chief executive Ross McEwan has rejected claims the bank is systemically distressing small businesses for profit, following a report from government advisor Lawrence Tomlinson.
McEwan, who joined the bank last month, admitted the bank had suffered “serious damage” to its reputation following the publication of Tomlinson’s Banks’ Lending Practices report on Monday (25 November).
The report claimed the profit-making nature of RBS’ Global Restructuring Group “significantly undermines its position as a turnaround division, in which good businesses should be restructured and returned to normal banking.”
However, McEwan refuted the claim that RBS “conducted a ‘systematic’ effort to profit on the back of our customers when they were in financial distress” and announced the bank had set in motion an independent review from law firm Clifford Chance.
McEwan said: “We do not believe that this is the case, but it has nonetheless done serious damage to RBS’s reputation. No evidence has been provided for that allegation to the bank. The review will investigate the claim fully and I will report back on its findings.
“The news of recent days doesn’t reflect the great work people across RBS do to support our customers every day. It is vital that we enjoy the trust of our customers and I cannot allow these allegations to undermine that trust.”
Tomlinson, entrepreneur in residence for the Department for Business, Innovation and Skills, has claimed his findings suggest there are instances where RBS is engineering a business into a default position in order to move it out of local management and into its Global Restructuring Group.
According to Tomlinson’s report, this generates revenue for the bank through fees, increased margins and the purchase of devalued assets by RBS’s property division, West Register.
He added that once in this part of the bank, businesses are “trapped”, with no opportunity to move or trade out of the position and “are forced to stand by and watch an otherwise successful business be sunk by the decisions of the bank”.
Tomlinson’s allegations have prompted interest from the Serious Fraud Office and City regulators into RBS’ activities.