James Hurley, Enterprise Editor, The Times reports that small and medium-sized companies that claim they were mistreated by Royal Bank of Scotland’s turnaround division are waiting to hear whether the City regulator will ‘voluntarily’ set up an FCA-agreed GRG compensation scheme for alleged victims.
What is GRG?
NatWest and RBS’s Global Restructuring Group, was a business support unit (BSU) for troubled businesses set up in the early nineties by Derek Sach and was formerly known as Specialised Lending Services. Following the credit crunch, GRG took control of 16,000 SME customers with £65 billion of assets via ‘Project Dash for Cash’. Following allegations of misfeasance, GRG was reportedly disbanded in August 2014. Distressed customer relationships are now handled by the Restructuring Group.
FCA-ordered ‘Independent Review’: Promontory and Mazars Report
The Financial Conduct Authority has received a report into the activities of Global Restructuring Group but has yet to set a set a date for its publication.
RBS said that “considerable uncertainty” remained over the conclusions of the review, which has been conducted by Promontory, the financial consultancy, and Mazars, the accountancy firm. As a result it said that it was not possible to estimate a cost impact on the bank.
The Times understands that so-called Maxwellisation of the much-delayed report, whereby the bank was allowed to see a draft of the report before publication, has been completed. Among the outstanding issues is whether a compensation scheme is set up.
FCA and Treasury discuss GRG Review
The FCA and the Treasury are understood to have met last week to discuss the issue. GRG sought to repair RBS’s balance sheet in the aftermath of the financial crisis by exiting loans that were no longer profitable and tying up too much capital.
Companies could also be transferred to GRG because they were in dispute with the bank, regardless of their financial position.
Hundreds of businesses claim that this resulted in their being unfairly treated, with many going to the wall after being transferred to GRG.
Obtaining Redress in RBS FCA GRG Review Scheme
RBS warned investors on Friday that if the regulator found “material failings” in its treatment of small companies the conclusions
“could result in . . . the imposition of redress requirements and the commencement of litigation claims, as well as potentially leading to wider investigations and litigation related to RBS’s treatment of customers in financial difficulty”.
The bank has always denied what it calls the “principal allegation” levelled against GRG by Lawrence Tomlinson, a former government adviser, that it sought to “artificially distress” viable companies.
RBS and NatWest Westregister Misconduct
Other allegations include that the bank charged excessive fees with little explanation and claims of conflicts of interest related to West Register, the bank’s property division, which acquired assets from RBS customers in GRG, often out of administration.
An RBS document seen by The Times reads:
“Our ability to acquire suitable assets into the West Register Companies is not only a reconstruction tool, but also a source of future profits.”
RBS says that West Register was used only as a fallback option to protect the value of the bank’s security when the open market could not yield a better result.
Specialist GRG Review and GRG Litigation Lawyers
The IRHP review scheme has demonstrated that banks will do everything they can to reduce or avoid compensation and that exercise of legal rights can have a significant impact in ensuring satisfactory redress is recovered from major banks.
LEXLAW have represented more claimants in cases against major banks than all other law firms in the UK over the last five years.
We are the leading law firm operating in this specialist area and have vastly more experience than anyone else of assisting small businesses in bringing successful review and litigation claims against RBS and NatWest.
Read more here in our Litigation & Dispute Resolution pages:
- Bank Business Support & Loan Recovery Claims GRG
- FCA Natwest RBS GRG Review (Global Restructuring Group)
Our specialist lawyers can review your case in a preliminary advisory meeting and thereafter assist in representing your business in any GRG review scheme as well as ensuring your business does not lose it’s legal rights of action due to the operation of the Limitation Act 1980.