City watchdog criticised for not sanctioning 'untouchable' RBS bosses over mistreatment of small firms
City watchdog the Financial Conduct Authority has been criticised for failing to sanction high street bank RBS or its "untouchable" former bosses for past mistreatment of struggling small firms.
FCA chief executive Andrew Bailey admitted today the regulator would not pursue action as it did not have the powers to do so.
The decision will dismay victims of RBS's now-defunct Global Restructuring Group (GRG) unit, which damaged firms in financial distress between 2008 and 2013 that it was meant to help.
Nicky Morgan, chairman of the powerful Treasury select committee, said it was "bewildering" that the watchdog could not act. "This demonstrates the need for a change in how lending for SMEs is regulated," she added.
Kevin Holinrake, Conservative MP and chairman of the all-party group for banking told The Telegraph he was "hugely disappointed" with the decision.
"It's unthinkable really. The people at the top made huge amounts of money, they've done wrong and they seem untouchable," he said.
Mr Holinrake called on the FCA to publish the findings "in full", including the names of those "responsible for this misconduct".
Mike Cherry, chairman of the Federation of Small Businesses, agreed the findings should be made public "as swiftly as possible".
"The only way to restore trust between small firms and the big banks is to show that the wrongs of the past are being put right," Mr Cherry said.
The FCA's own initial report into the matter - published by MPs after the regulator refused to make it public - found that GRG had been responsible for "widespread" mistreatment of small firms.
The report laid the blame on former bank bosses for chasing profits at the expense of distressed firms, with some left in a worse state.
It also uncovered an internal GRG memo which encouraged managers to give struggling customers enough rope to "hang themselves".
Despite the findings, Mr Bailey said the FCA could not act.
"After carefully considering all the evidence we have concluded that our powers to discipline for misconduct do not apply and that an action in relation to senior management for lack of fitness and propriety would not have reasonable prospects of success," he said.
He added that the activities at GRG were "largely unregulated" and its powers to take action were "very limited" in this area. The FCA's senior managers regime - which is designed to police bad behaviour by bosses - was brought in after the period concerned, in 2016.
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Mr Bailey said: "I appreciate that many GRG customers will be frustrated by this decision but we have explored all the options available to us before arriving at this conclusion.
"The fact that we can’t take action in no way condones the behaviour of RBS. We expect high standards from the firms we regulate and RBS fell well short in its treatment of GRG customers."
Sir Howard Davies, RBS chairman, welcomed the decision: “The Board welcomes the FCA’s confirmation that it has concluded its investigation into the bank and that no further action will be taken.
"We await the publication of the FCA’s full account and will reflect carefully on its findings to learn any further lessons from what was a hugely challenging time for the bank, its customers and the wider economy."
RBS is currently compensating customers affected, although the process has been criticised for not being sufficiently independent.
Last week it emerged Police Scotland is making enquiries into an unrelated allegation of bribery relating to a former manager at RBS Restructuring - the unit that has replaced GRG. The alleged actions, first reported by The Times, date between 2014 and 2016.
Police Scotland separately said it had decided there was no basis for a prosecution regarding actions at GRG.
