A REVIEW yesterday cleared Royal Bank of Scotland of systematically setting out to defraud its small business customers.
City law firm Clifford Chance said it had “not found any evidence” of the bank “distressing otherwise viable businesses”, an allegation made in a report by Dr Lawrence Tomlinson, an adviser to Business Secretary Vince Cable.
RBS hired Clifford Chance to investigate the claims it had pushed struggling small businesses into its “turnaround unit” to milk them for higher fees and take control of their assets.
Tomlinson, in his role as entrepreneur in residence at the Department for Business, had alleged that RBS, through its Global Restructuring Group (GRG) division, was guilty of putting many struggling small businesses “on a journey towards administration, receivership and liquidation”.
But after interviewing 138 small business customers in the recovery unit, 45 RBS staff and reviewing 1,200 documents, Clifford Chance dismissed the central allegation while admitting relations between small firms and the bank became “fraught” during turnarounds.
It also found no evidence to support claims that the bank identified properties which it wanted to acquire or procuring their acquisition as part of the restructuring process.
Ross McEwan, RBS chief executive, welcomed the findings, as the bank also announced new actions to bolster support for small firms in financial trouble.
“The trust a bank has with its customers is fundamental.
“That trust was put at risk at RBS by the allegation of systematic abuse made in the Tomlinson report,” McEwan said. “I welcome the Clifford Chance findings which show no evidence of the serious and damaging allegation that we had set out to deliberately defraud business customers.”
A report by City grandee Sir Andrew Large this year identified flaws in some of RBS’s dealings with small firms, but also rejected Tomlinson’s claims.
The bank said yesterday it will not charge punitive default interest for the first 90 days when a small firm customer defaults on loans. “From the customer’s perspective this can feel like an additional cost at the point when they are least able to afford it,” the group said.RBS also said it is to wind down and sell any assets in its West Register vehicle, which occasionally bought properties as part of corporate restructures. The vehicle operated mainly in the open market and with strict internal controls, RBS said.
However, it now acknowledged there was a “damaging perception” of a conflict of interest when the bank bought a property as part of a restructuring.
Colin Borland, of the Federation of Small Businesses in Scotland, said: “We are delighted the report has been done so thoroughly and that RBS seems to have taken it to heart with the proactive changes it is making, even while it was cleared of the central allegation of driving firms under for a quick buck.”
However, Tomlinson tweeted he was “surprised” at the suggestion the Clifford Chance report cleared RBS. He said he never accused the bank of fraud “and the report supports my findings. West Register being wound down”.
Will Davies, a former banker with Societe Generale, branded the report “a waste of taxpayers’ money” which should be probed by the government.