Comment: Bank gets some relief from its critics

Martin Flanagan
Martin Flanagan
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ROYAL Bank of Scotland boss Ross McEwan, who has looked at times as if he is trying to repair a reputational roof in high winds, will be relieved an independent review has cleared the bank of systematically setting out to defraud struggling small businesses.

But if the report commissioned by RBS from City legal firm Clifford Chance had found evidence for allegations of systematic, premeditated manipulation of small businesses into administration or receivership, it could well have been a bridge too far for any recovery in the bank’s public relations.

Those allegations, which triggered an admirably speedy response by ­McEwan, were made last November by Dr Lawrence Tomlinson, a senior adviser to Business Secretary Vince Cable in his role as entrepreneur in residence at the Department for ­Business.

That seemingly official provenance for the allegations gave them an extra frisson. But, embarrassingly for Tomlinson, after what seems a pretty exhaustive examination of RBS small business customers, staff and 1,200 documents, the legal review found no evidence for the core allegation.

In fact, Clifford Chance said in its review that it “intentionally compiled a sample of files that was more likely to hold evidence of the principal allegation, if such evidence existed”.

That the lawyers still felt such evidence did not exist makes it difficult for anyone to dismiss the review as a whitewash along the lines of “he who pays the piper calls the tune”.

Alongside its exoneration, RBS has also ushered in some changes that should help its public image with SMEs. In future, it will not charge punitive default interest for the first 90 days when a small business defaults on its loan conditions.

Although widespread in the banking industry, that has always looked like kicking a person when they are down. In addition, it is welcome that RBS has belatedly realised that it created an unwholesome perception of a conflict of interest when its West ­Register vehicle bought properties owned by SME bosses as part of a ­restructuring.

West Register is to be abolished.

In the Twitter-sphere, Tomlinson was saying last night that the latter is proof his own report’s findings have been upheld. LOL, as devotees of that milieu say.

Co-op’s righteous, but ropey, style on display

ETHICS are nice, but competence can be underrated. It is a truism that if the Co-operative Group really wanted to be a morally superior business entity it would not start here: drowning in debt, shorn of boardroom confidence, riven by infighting.

The latest calamitous results confirm the Co-op Bank has been the biggest drain on its reputation and resources, with the £1.5 billion belatedly blown black hole in its finances leading the parent to give up 70 per cent of the subsidiary to hedge funds.

The parent needs to cough up a further £120 million if it wants to preserve the size of its remaining 30 per cent stake in the bank.

If that stake falls below 20 per cent then the Co-op can no longer automatically enforce a bailout clause that said the bank must uphold its ­ethical co-operative values. Will the Co-op’s banking backers play ball? They are anxious at the bitterly resisted ­governance reform plans for the ­mutual. Delicate.