Financial Conduct Authority (FCA)
The Federation of Small Businesses (FSB) has been looking at the FCA's report on Royal Bank of Scotland's Global Restructuring Group (GRG) which was published earlier.
The FSB's National Chairman Mike Cherry says the regulator has "failed to provide consolation to former GRG customers who lost everything".
"Despite acknowledging that small business owners suffered insensitive, dismissive and aggressive treatment at the hands of GRG, the FCA is standing by its decision to eschew enforcement action against those responsible for that unfair treatment," he said.
It is time to think about the way business lending is regulated, he said.
“The FCA needs to wise-up to the fact that most small business owners have far more in common with everyday shoppers than they do with big corporations," he said.
An FCA report looking at why it did not take action against RBS over its controversial GRG restructuring unit has been criticised by MPs.
"This report is another complete whitewash and another demonstrable failure of the regulator to perform its role," said Kevin Hollinrake, the MP who co-chairs the group the All Party Parliamentary Group (APPG) on Fair Business Banking and Finance.
He said the FCA was supposed to “consider the root causes” of the problems with GRG and establish whether “the causes of such treatment were known about, authorised by and/or sanctioned by management within RBS group”.
"They have manifestly failed to do this," he said.
He referred to last year's announcement by the FCA that its powers did not apply in this instance.
"It could find 'no evidence of dishonesty, lack of integrity' any 'absence of competence or capability', anyone acting 'recklessly' or with a dodgy 'ethical compass' and did not 'make findings about misconduct' amongst the senior management team. How then did the UK’s biggest ever banking scandal take place?
"The FCA must publish a full account of its findings including naming those responsible for the shameful mistreatment of thousands of UK SMEs [small and medium-sized businesses]."
Back to that FCA report explaining why it did not take action against RBS and the GRG unit.
It outlines changes to the UK's rules since then. It points to the new Senior Managers and Certification Regime (SM&CR) which means that the way the "responsibilities and accountability" of senior managers are defined covers all activities they conduct, and allows for action to be taken if they're not suitable for the role.
It also points to changes to the remit of the Financial Ombudsman Service which give it powers to handle complaints from more small businesses than in the past.
The regulator said it would have had jurisdiction under the SM&CR - if there was sufficient evidence - to take action against RBS senior management for breaches of the conduct rules, even though GRG’s activities were largely unregulated.
But, the SM&CR could not have been applied retrospectively, the FCA added.
"We cannot say whether we would have been able to bring successful cases against RBS senior management had the SM&CR been in force during the review period.
"This would involve applying a new regime to a historic set of facts and it would not be appropriate for us to make a hypothetical judgement.
"The SM&CR cannot be applied retrospectively to conduct that happened before it was implemented in March 2016," the FCA said.
The Financial Conduct Authority, in its explanation of why it did not take enforcement action against Royal Bank of Scotland and its GRG unit, also said it looked at the "competence and capability" of senior management.
While there were "instances of inappropriate customer treatment within GRG" the lack of rules at the time led it to find that there wouldn't be a reasonable prospect of a case being successful.
"Individuals must be held to account where their behaviour falls below the applicable standards, but to do that, the standards need to be sufficiently clear at the time," the FCA said.
The FCA said that GRG operated at a time when it was under "unprecedented stress as a consequence of the severe errors made by former management in the years leading up to the financial crisis".
The FCA said in today's report that it began an enforcement investigation "in order to understand senior management knowledge of the issues in GRG and to further consider if there was any basis for us to take action".
But, it said, GRG "was largely outside our jurisdiction".
"There are no enforceable regulatory rules, for example ‘conduct of business’ rules, which we can use to hold RBS to account in relation to GRG’s treatment of SME customers.
"The largely unregulated nature of GRG’s business also means that, in this case, we cannot take disciplinary action like imposing financial penalties on RBS or individuals.
"There was an alternative, which we carefully considered. Where we decide that people are not fit and proper, we can take action to prohibit them from the regulated financial services industry, even where their conduct took place in an unregulated area".
But it found "no evidence that any member of senior management was dishonest or lacking in integrity".
The Financial Conduct Authority, in its report into why it did not take enforcement action against Royal Bank of Scotland over its GRG unit, says that the unit had both commercial and turnaround objectives.
"But staff did not know how to balance them or how to best communicate with customers in financial difficulty.
"This meant that its communications with customers often created an expectation that their business would be turned around, which could not be met in practice.
"Staff did not show enough understanding of the extreme emotional stress some of their SME customers were going through".
The Financial Conduct Authority has reiterated that it can't take any action against RBS or senior managers over the controversial Global Restructuring Group.
It had previously found no evidence that RBS managers sought to treat customers unfairly.
The regulator published a report into the decisions it took to not to begin enforcement action against the bank.
In the foreword, chief executive Andrew Bailey said:
"Our investigation has found that GRG clearly fell short of the high standards its customers expected. That said, our investigation also concluded that the evidence does not suggest that management sought to treat customers unfairly. This is an important conclusion in an area that has been contentious".
He concludes: "I must acknowledge the distress felt by many of GRG’s customers. The firm’s relations with its customers were often insensitive, dismissive and sometimes too aggressive; these failings made an already stressful situation worse.
"I know that many customers of GRG therefore disagree with our decision to not take enforcement action, but I hope that this report will explain why we reached that decision".
The Financial Conduct Authority says it will save customers up to £60m a year through a clampdown on "buy now pay later" credit.
New rules will be in force by 12 November and cover firms offering so-called BNPL credit through catalogue credit, store cards and or point of sale.
Such credit tends to include a promotional period during which consumers do not have to make payments and are not charged interest. However, if the consumer does not repay the entire amount within this period, then interest will usually be charged from the date of purchase.
The FCA will stop customers being charged backdated interest on amounts that have been repaid during the offer period and require firms to remind customers when the offer period is about to end.