MPs use parliamentary privilege to publish report on 'disgraceful' RBS unit

MPs (BSE: MPSLTD.BO - news) have taken the unusual step of using parliamentary privilege to publish a regulator's full report on Royal Bank of Scotland (LSE: RBS.L - news) 's controversial Global Restructuring Group (GRG).

The Treasury Select Committee had demanded the Financial Conduct Authority (FCA) publish, or hand over, the unredacted version by Friday last week.

Only a limited summary had previously been disclosed.

While the watchdog did comply, it still refused to publish the whole document it had commissioned, continuing to cite a lack of legal consents.

The chair of the powerful committee, Nicky Morgan MP, confirmed on Tuesday that it had unanimously agreed to publish the document given "overwhelming" public interest.

She (Munich: SOQ.MU - news) described the findings as "disgraceful".

The report examined allegations that RBS - still more than 70% taxpayer owned - mistreated many of the 12,000 small business customers it placed in the GRG division between 2007 and 2012 - during the financial crisis and subsequent recovery.

It included claims by some firms that they were deliberately forced to fail to benefit the bank.

The report found woeful governance allowed "widespread inappropriate treatment of customers", but no evidence that "defaults were engineered to transfer businesses to GRG simply to generate revenue for RBS through fees".

The release followed the publication of previously undisclosed memos showing GRG staff being encouraged to apply pressure and extract money from customers.

One 2009 memo, entitled Just Hit Budget!, talked of applying particularly high interest rates, which could then be reduced if customers signed over a stake in their business or property, and detailed how staff sometimes "need to let customers hang themselves".

Mrs Morgan said: "The overarching priority at all levels of GRG was not the health and strength of customers, but the generation of income for RBS, through made-up fees, high interest rates, and the acquisition of equity and property."

She added: "There is overwhelming public interest in bringing transparency to what happened at GRG, given the earlier leak of the report, and in ensuring that everyone can see, and know that they are seeing, an authentic and verified copy of Promontory's original report.

"We have today published the terms of reference for our inquiry into SME finance. We'll examine what must change to prevent what occurred at GRG from ever happening again, and how to restore confidence among SMEs in banks as a source of finance."

An RBS spokesperson responded: "We are deeply sorry that customers did not receive the experience they should have done while in GRG.

"The report makes for very difficult reading and some of the language used by our staff in the past was clearly unacceptable.

"Although the most serious allegation - that we deliberately targeted otherwise viable businesses in order to distress and asset-strip them for the bank's profit - has been shown to be without foundation, we know that the bank got a lot wrong in how it treated some customers in GRG during the financial crisis."

The bank went to to explain that it had put in place a complaints process and automatically refunded complex fees - insisting its operations had "all changed fundamentally" to help rebuild trust.