RBS accused of ‘horrendous treatment’ of small firms

25-Nov-2013 - Last updated on 26-Nov-2013 at 07:56 GMT

RBS has been accused of treating some small businesses 'horrendously' by a government adviser

The Royal Bank of Scotland (RBS) has been accused of “horrendous treatment” of some small firms, after it allegedly wrongly classified sound businesses in a high risk category in order to boost revenue.

The claims were made in a report complied by government adviser Lawrence Tomlinson, which business secretary Vince Cable has filed with City regulators the Financial Conduct Authority and the Prudential Regulation Authority.

Tomlinson told BBC News: “The treatment that some of these companies have had is horrendous.”

The report highlights claims that financially sound businesses were included in the bank’s Global Restructuring Group (GRG) lending division, which handles businesses classified as having a higher risk than others. Classifying businesses in this group generated more revenue for the bank and boosted its profit margins, according to the report.

‘Major threat to the UK economy’

An RBS spokeswoman said: “In the boom years leading up to the financial crisis, the over-heated property development market became a major threat to the UK economy. RBS did more than its fair share to fuel this and commercial property lending was one of the key drivers of our near collapse as valuations rapidly plummeted.

“Facing up to these mistakes has been a difficult, but essential part of making RBS a safe and strong bank once again. That has been one of GRG’s main tasks. GRG successfully turns around most of the businesses it works with, but in all cases is working with customers at a time of significant stress in their lives. Not all businesses that encounter serious financial trouble can be saved.

“We are already committed to an inquiry to investigate how customers are treated by RBS when facing financial difficulties and ensure that we provide them with appropriate support.”