LONDON - Royal Bank of Scotland, the British bank principally owned by the government, pushed some business clients into serious financial difficulties to charge certain fees and take over their assets on the cheap, a report commissioned by the government said Monday.
The report was published by Lawrence Tomlinson, a British businessman and adviser to the government, and raises serious questions about practices at R.B.S. It was released â€" on the same day that another government report said the bank is not doing enough to lend to small and medium-sized businesses â€" as R.B.S.’s new chief executive is touting progress in business lending and the government is keen on selling its majority stake in the company.
The government passed the findings of Mr. Tomlinson’s report to the Financial Conduct Authority, Britain’s financial regulator.
“There are many devastating stories of how R.B.S. has wrecked good businesses and the ruinous impact this has on the lives of the business owners,†the report said. “It is clear that a perception has arisen that the intention is to purposefully distress businesses to put them in the global restructuring group and subsequently take their assets†at a discounted price.
R.B.S. on Monday admitted that it still faced legacy issues linked to the role it played in fueling the “over-heated property development market,†which in 2008 “was one of the key drivers of our near collapse as valuations rapidly plummeted.†The bank said that “facing up to these mistakes has been a difficult, but essential part of making R.B.S. a safe and strong bank once again.
The restructuring unit has been working “with customers at a time of significant stress in their lives,†R.B.S. added. “Not all businesses that encounter serious financial trouble can be saved.â€
George Osborne, the chancellor of the Exchequer, told an ITV television program that the report was “shocking†and that the government was “actively trying to seek out these problems. We are not trying to brush them under the carpet.â€
The government bailout for R.B.S. totaled more than £45 billion, or about $73 billion, and Mr. Osborne is eager to start selling the government’s 81 percent stake.
R.B.S.’s global restructuring unit was set up to manage distressed loans and to try and work with clients to find remedies. To speed up its turnaround following the government rescue in 2008, the bank announced last month that it would separate about £38 billion, or $61 billion, of toxic assets into a separate entity within the bank and create a so-called “internal bad bank.â€
A separate report published on Monday by Andrew Large, a former Bank of England deputy governor, into R.B.S.’s lending practices to small and medium-sized companies said the bank was impeding lending to those businesses.
“A perception has arisen among some small and medium-sized enterprise customers that R.B.S. is unwilling to lend,†the report said. The bank failed its own planned lending volumes and is struggling with “internal upheavals†and “operational challenges, particularly in the initial interaction with customers looking to borrow,†according to the report.
The report also said that R.B.S. handled some relationships with distressed clients badly and that even though it has made some changes to its procedures “there is a risk that awareness of this will discourage some borrowers from approaching RBS to discuss new borrowing needs.â€
The reports raise questions over whether R.B.S. could face compensation claims from some customers. Any claims would add to R.B.S.’s current troubles, which also include the ongoing investigation into foreign exchange market manipulation.
Ross McEwan, who took over as chief executive of R.B.S. at the beginning of October, pledged to increase lending to small and medium-sized businesses. Reacting to an early summary of Mr. Large’s report on Nov. 1, Mr. McEwan said the bank has been proactively contacting 16,000 customers recently to show it was willing to lend.
