ROYAL Bank of Scotland’s treatment of small businesses was more akin to an “abattoir,” an MP has claimed.
It came during a debate in the Commons on the operations of the bank’s controversial global restructuring group (GRG), accused of driving businesses, damaged by the financial crisis of 2008, to the wall so the bank could remodel, push up interest rates.
Effectively they were preyed on by RBS which wanted to bankrupt the companies, Businesses in GRG would charge fees, be forced to pay for consultants, and see revaluations of assets that could result in agreements between the firms and creditors being breached. Once bankrupted RBS would take charge of assets and made a profit from their suffering
An internal memo from RBS, obtained by the Treasury select committee, and released ahead of the debate, referred to struggling companies as “basket cases”, and encouraged staff to not miss the opportunities of bonuses. In a section headed “Rope”, the bank’s employees were told: “Sometimes you need to let customers hang themselves.”
“You have gained their trust and they know what’s coming when they fail to deliver,” it added.
RBS boss Ross McEwan insisted that the memo was “written by a junior manager who is no longer employed by the bank”.
He added that “at no time did it form part of GRG or RBS policy” and said the language was “completely unacceptable”.
Dumfries and Galloway’s Tory MP Alister Jack told MPs that he had been a target of the bank’s unscrupulous behaviour in 2009. He had been part of what was called “Project dash for cash”.
Despite his company making profit, the bank tried to tell him he was in breach of finance agreements.
“The plan was to seize assets through perceived default. Between 2007 and 2012 more than 15,000 companies were moved into GRG to await their fate, and I have no doubt many of those customers were not treated with proper care and attention,”
MPs were told businesses were “carved up like a Sunday roast”.
“Since 2008, we know that 16,000 small businesses were put into GRG and the vast majority of them were liquidated,” said Labour’s Clive Lewis.
“I think that tells you all you need to know. This was meant to be somewhere where they were put back to try to get them into a situation where they would come back as a viable business.
“Actually, it was more than an intensive care unit, it was more like an abattoir, where they were actually stripped and taken apart.”
The Financial Conduct Authority is still investigating whether to take further action.
The bank has set aside £400 million to tackle complaints and pay compensation to businesses affected.
Around £115 million has already been paid out.
McEwan and RBS chairman Sir Howard Davies are to be grilled by MPs over the GRG on January 30.
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