trending Market Intelligence /marketintelligence/en/news-insights/trending/bmslgb6cdz64j8_yrv2eka2 content esgSubNav
In This List

Nearly all current RBS senior restructuring staff worked in controversial GRG

Blog

Banking Essentials Newsletter 2021: December Edition

Blog

Automating Credit Risk Surveillance Using Statistical Models

Blog

Post-webinar Q&A: Speed and Scalability – Automation in Credit Risk Modeling

Case Study

A Chinese Bank Takes Steps to Minimize Risks as it Supports International Trade


Nearly all current RBS senior restructuring staff worked in controversial GRG

Nearly all of the senior staff in Royal Bank of Scotland Group Plc's current restructuring division used to work at the Global Restructuring Group, a now-defunct unit that is coming under pressure from the government over allegations of abuses of small-business clients.

According to evidence provided by RBS to the U.K. House of Commons' influential Treasury select committee, 30 of the 32 employees at senior manager grade or above at RBS Restructuring also worked in the Global Restructuring Group, or GRG. The GRG was set up in 2007 as a turn-around unit for struggling small businesses and was replaced with RBS Restructuring when it was wound up in 2014.

Nicky Morgan, chair of the Treasury committee and a conservative member of Parliament, said in a Feb. 27 statement the the disclosure raised concerns that changes to the restructuring division had been a mere "rebranding exercise." RBS CEO Ross McEwan had assured the committee that the culture of RBS Restructuring was "fundamentally different" from that of GRG, Morgan said.

The Treasury committee on Feb. 20 published a so-called skilled persons report carried out by consultancy firm Promontory Financial Group on behalf of the Financial Conduct Authority, which had refused to disclose it. The report, which had been leaked on an anonymous blog, details "inappropriate" treatment of small businesses by staff at GRG, such as the levying of unnecessary fees. It also revealed that only 10% of the struggling businesses put into GRG were returned to the main RBS bank, while the rest were liquidated, sold or ended up in administration.

"The discovery that almost all the senior management in the new unit previously worked at GRG raises concerns that there has merely been a rebranding exercise. I have asked Mr McEwan to set out how the training program and performance objectives of these staff have been developed to address the toxic culture described in the Promontory report," Morgan said.

She also said the £1 million in direct loss claims paid to small-business owners to date "is surprisingly low," and she added that she had requested updated complaint outcome figures on a quarterly basis.

"There remains a substantial sum of money — up to £280 million — within RBS' earmarked budget for its complaints process, which could be paid out under consequential losses," she said in a statement. Morgan noted McEwan's comments that consequential losses can often greatly exceed direct losses.

An RBS spokesperson said in an email that the bank had "already made offers of £115 million relating to direct losses" to former GRG clients. The Treasury committee described these payouts as automatic refunds of complex fees.

"The culture, structure and way RBS operates today have all changed fundamentally since the period under review and we have made significant changes to deal with the issues of the past, including how we treat customers in financial distress. The changes the bank has made align with the relevant recommendations from the report and the majority were made before we received the report. Our focus is now on rebuilding trust and supporting our customers," the spokesperson said.