“Not fit for purpose” RBS GRG compensation scheme called out by leading misconduct lawyer

MBM Commercial partner Cat MacLean, who is one of Scotland’s leading legal authorities on banking misconduct, has told Sir William Blackburne, the retired High Court judge installed as the independent arbiter of the scheme set up by Royal Bank of Scotland to compensate victims of the its now notorious Global Restructuring Group, that only a tiny fraction of the businesses affected are likely to ever have any real prospect of compensation due to the extraordinarily stringent rules the bank has applied to the process.

Last year Edinburgh-based RBS disclosed that it had set aside £400 million to compensate small business owners who had been placed in the controversial GRG unit - 16,000 firms at its peak.

Business were told at the time that the division was a turnaround specialist for stricken firms but it has since been accused of deliberately stripping the assets of those businesses for its own profit and forcing them into bankruptcy.

The provision since made by RBS for compensation of those business came after the bank acknowledged failings within the now defunct GRG.

However, while the still 73 per cent state-owned bank said it is automatically refunding some fees charged to customers of the GRG, it has stopped short of admitting liability for any business going bankrupt and firms demanding additional financial restitution will need to prove that the losses they sustained were as a direct result of the bank’s actions.

These complaints have to be upheld by Mr Blackburne, and Ms MacLean, who last year set up MBM Veritas alongside Edinburgh financial advisory firm Veritas Treasury, has now told the scheme’s independent arbiter that the rules imposed by RBS to the process mean only handle complaints from “the officials of the company presently appointed and listed at Companies House” can be considered.

Ms MacLean points out the absurdity of this by noting that the vast majority of companies placed in the GRG unit subsequently failed and therefore no longer exit.

According to Ms MacLean, “out of every 100 businesses that went into GRG, 93 didn’t survive”.

“That means we have a scheme that only works for about seven per cent of all the businesses that went through the GRG,” she added.

“Of that seven per cent another significant percentage are excluded because some of the fees were levied from them after 2013 .

“The scheme will therefore only look at something like five per cent of all the businesses in the GRG and that’s before you look at how many they will find in favour of.

“If they find in favour of 50 per cent of the claims they are willing to entertain - and that would be a very high percentage - then in fact they will be compensating just 2.5 per cent of the total number of businesses that were washed through GRG.”

Ms MacLean said that that MBM Veritas would be writing to Mr Blackburne “to see if he’s aware that he’s only entitled to consider such a small number of claims”.

Lord Cromwell, co-chair of the all party parliamentary group on fair business banking, added that the scheme is not fit for purpose.

“The 92 per cent of businesses worst affected by the actions of GRG have no hope of any compensation via the scheme, which itself holds no credibility with either the public or within Parliament,” he said.