FCA publishes summary of Skilled Person Report on GRG

Date published




The Financial Conduct Authority (FCA) has published the summary of its Skilled Person Report into the Royal Bank of Scotland’s former Global Restructuring Group (GRG) Division and the SME customers referred to it.

It will now carry out a ‘more focused’ review into the issue, which it has been investigating for four years, following the publication of the Tomlinson Report in 2013.

In the summary, the FCA found ‘widespread’ mistreatment of customers in some areas, and criticised ‘inappropriate actions’ by GRG. The FCA did not uphold, however, what it termed ‘the most serious allegations’ made by Tomlinson against the bank.

The regulator will now consider widening the remit of the Ombudsman service to small and medium-sized UK companies.

Highlights from the report

GRG was closed down in 2014, and RBS said it had acknowledged its failings and has again apologised for its mistakes. According to the report, inappropriate actions were ‘widespread’ which included:

  • 92% of viable firms suffered "inappropriate action", such as interest charges being raised or unnecessary fees added.
  • Good turnaround practice was not adhered to when supporting small businesses
  • There was an undue focus on debt reduction and price increases, and not on the longer-term prospects of customers.
  • Customers’ complaints were not handled fairly, and certain conflicts of interest were not dealt with.

RBS chief executive, Ross McEwan, noted that the bank had ‘acknowledged for some time that mistakes were made and have apologised that we did not always provide the level of service and understanding we should have done’. The bank was also pleased the regulator confirmed that the remediation steps the bank announced in November 2016 were appropriate, although many affected business owners would disagree with this assessment.

The impact this will have

The publication of the summary has been long anticipated, and the Treasury Select Committee chair, Nicky Morgan MP, last week said it has taken the FCA "too long" to publish the summary. When examining the impact of its publication, however, it is important to put such complaints into context and understand that the FCA’s findings will not have an impact on the RBS official complaints procedure for SME customers, which is overseen, in parts, by retired high court judge, Sir William Blackburne.

With the bank cleared of major wrongdoing but acknowledging the mistreatment that occurred in many cases, the focus from major banks and SMEs will now be to ensure that the commercial lending sector can move forward and help small and medium-sized businesses bank with confidence once again.

Importantly, the regulator clearly recognises that this means acknowledging the limited role the FCA currently has in commercial banking arrangements. The debate will now move to how to fill the regulatory gap that has been exposed by this investigation.

Role of the Financial Ombudsman

Following the publication of last week’s summary, the FCA has admitted it is considering whether to widen the Ombudsman service to cover SMEs. Presently, the Financial Ombudsman Service is a statutory body that handles disputes between companies that offer financial products for consumers. Features of the Ombudsman include:

  • It is able to impose fines of up to £150,000.
  • It is restricted to companies with a maximum turnover of £2 million, employing less than 10 people.
  • It is inaccessible to bigger businesses which had made complaints about GRG.

Comments made by the FCA chief executive, Andrew Bailey, last week (24 October) indicate that the regulator is seeking to broaden the scope of the Ombudsman to provide more SME customers with access to it. The Ombudsman spokesperson offered no confirmation of this, but admitted that it was a ‘flexible organisation that is used to managing a large caseload’. Expect this debate to continue into 2018 as the FCA consults stakeholders.


The FCA summary recommends that the regulator work with government to ensure there are adequate protections put in place for less sophisticated SMEs, and that a new code is examined that banks and SME customers could both work to.

This will be a key area of debate in the near future, and our view is that a new commercial banking code could help unlock financial solutions for many SMEs.

It is, however, important that successful and larger SMEs are not excluded from the new code. If the focus of the new code and the extended Ombudsman service is too narrow, many entrepreneurs and larger but not yet ‘sophisticated’ medium sized businesses may find themselves trapped in a grey area, which would be problematic and may result in businesses unable to grow.

The next stage of the debate will be to recognise that many of the important modern sectors for the UK economy, such as science and technology, require both lenders and companies to have more innovative and flexible relationships compared to SMEs in the past. For example, this could provide opportunities to alternative finance providers who are prepared to assist tech companies with more innovative services, such as valuing intellectual property as an asset. What is for certain is that with the growth of technology comes both opportunity and new forms of risk, and the challenge will be to manage this in a globally competitive SME marketplace. In this regard, the UK has a real opportunity to rejuvenate its approach to SME banking.