RBS Global Restructuring Group and SMEs — House of Commons, 2018-01-18
Topic: Domestic Commerce
William Roffen Esterson (Labour, Centre-left): I hope the Government will listen to the overwhelming case that has been well made on both sides of the House—including by speaker after speaker on the Government Back Benches—for action on behalf of small businesses in our constituencies We started with a powerful speech from my hon. Friend the Member for Norwich South (Clive Lewis), and I commend him and the all-party parliamentary group on fair business banking and finance for bringing this issue forward. I also thank all Members who have taken part in the debate and particularly my hon. Friend the Member for Cardiff Central (Jo Stevens), my right hon. Friend the Member for Tynemouth (Mr Campbell) and my hon. Friends the Members for West Bromwich West (Mr Bailey), for Bridgend (Mrs Moon), for Manchester, Withington (Jeff Smith), for Vale of Clwyd (Chris Ruane), for Rutherglen and Hamilton West (Ged Killen), for City of Chester (Christian Matheson), for Poplar and Limehouse (Jim Fitzpatrick), for Ogmore (Chris Elmore), for Gower (Tonia Antoniazzi), for Stretford and Urmston (Kate Green) and for East Lothian (Martin Whitfield) When Carillion went bust at the start of the week, it struck me that there were similarities with the way that RBS treated its small business customers. In both cases, smaller businesses—Carillion’s suppliers and RBS customers—have been imperilled by the actions of much larger players. I know of at least one business that, having been put into GRG, is still in the successor division, years later, and as of this week is owed tens of thousands by Carillion that it is never going to receive. It is not good enough. The mistreatment of smaller firms must stop The news that banks are to provide additional support for Carillion’s suppliers is of course welcome, but this must not be just a short-term, headline-grabbing announcement. It must mean longer-term support, of the sort that was sorely lacking in RBS GRG and of the kind that was put in place by the Labour Government to support suppliers with the creation of the taskforce following the collapse of Rover in 2005. That is a good example for Ministers to follow What happened at RBS GRG was nothing short of a scandal and a disaster for the victims. Businesses were ruined, families were torn apart and people took their own lives. My hon. Friend the Member for Cardiff Central reminded us of the criminal convictions at Lloyds HBOS. There are many—some mentioned it today—who believe criminal investigations to be the appropriate way forward at RBS GRG. Justice is a vital step in the long process of rebuilding trust in business lending, which in 2016 was still so low that only 9% of smaller firms approached their bank to borrow money—and they did not all borrow. It is crucial to the success of our economy that there is a healthy relationship between the banks and smaller firms. We need our smaller firms to play their full part in contributing to the prosperity of this country. Relationships of trust are crucial The next Labour Government will introduce a network of regional development banks to support smaller firms, but those firms also need the help of the traditional banking sector and they need it now. Let us remember that, according to the Promontory report, 83% of businesses that were put into GRG were the subject of inappropriate treatment. Two thirds of businesses were viable, yet depending on which figures we look at, only 5% or 10% survived the process. The figure for inappropriate treatment of those who were potentially viable is higher, at 92% According to the then head of global markets, RBS decided to exit non-core markets. In practice, that meant getting businesses off its books as fast as possible, not by telling its business customers so that they could move to a new bank, but by putting them into intensive care—or rather, a slaughterhouse or mortuary, or on death row, to borrow the phrases used by my hon. Friends—charging exorbitant fees, using their own valuations and using interest rate-hedging products. Then there was the freezing of personal bank accounts, something that happened to my constituent John Pile. Mr Pile had never previously missed a mortgage payment on his commercial properties, yet the result for him and his family was the bank claiming that he had defaulted, despite having substantial sums of money in his personal account, which was frozen. He could have used that money, but was prevented from doing so by the same bank Customers who were making decent profits, whose rental incomes were well in excess of their interest payments, were put into GRG on the spurious grounds that their loan-to-values had suddenly dropped, on the basis of revaluations carried out by the bank’s own valuers. Then there was the overnight demand of repayment of overdrafts that were a key part of the day-to-day operations of many businesses. This was not proper turnaround practice—it was not turnaround practice at all for the customers. It was more like the turnaround of the bank at the expense of its customers. Perhaps the name, Global Restructuring Group, was a clue. It was a division responsible for the restructuring of the bank, not the small businesses that banked there Which brings me to the call for a full independent inquiry. Promontory carried out part one of its investigation for the Financial Conduct Authority. RBS does not want the report published, although much of it is now in the public domain, but nor does RBS want Promontory to carry out part two. Instead of sticking to its guns, the FCA has complied with the demands of the bank that it is supposed to regulate and gone for the in-house option. The suspicion will remain that such an approach means a lack of independence on RBS by its regulator. We know that the FCA is afraid of legal action if it publishes part one of the Promontory report because it told the Treasury Committee that, but it will simply not help to rebuild trust if the regulator is in fear of a bank and feels restricted in its ability to provide full oversight There are still many questions to be answered. Why were viable business customers put into GRG? At Ulster Bank, a substantial part of its business was deemed non-core and its customers were nearly all put into GRG. Meanwhile, there are disturbing parallels at other banks, affecting Dunbar Bank business customers and Acorn Finance, and we also heard about Bibby. They all tell a similar story to the RBS GRG story. Why did RBS not tell its customers when they were no longer core business and give them the chance to move to other banks? Who in management knew? Where was the oversight in the Treasury? Promontory says that management knew, so when will those responsible be held accountable? Why did GRG not follow turnaround procedures? This all needs to be in the public domain and properly acknowledged Until those questions are answered and those responsible held accountable, the victims will be denied justice, we will remain at 9% of smaller businesses asking their banks about borrowing money, and investment, productivity and prosperity will all be undermined. As my hon. Friend the Member for Norwich South says in the motion, the call, which has been well evidenced today, is for a robust system of dispute resolution. It is needed to overcome the imbalance of power in the relationship between smaller firms and their banks. That is also why the call for an inquiry into the treatment of SMEs by financial institutions and the protections afforded to them is the right call. And yes, it should look at all banks, not just RBS. No one else can intervene and ensure fair treatment. The regulator has had to restrict its activities under RBS pressure. Unless and until the Government intervene, this injustice and the long-term economic effects will continue to hold back a crucial part of our economy The issue of how RBS GRG treated its smaller business customers will not go away. The victims will not go away. Those of us across the House who want to see justice will not go away. The Government must now ensure that justice is done and seen to be done.