RBS boss says now is the time to regulate small business lending

Despite being able to evade disciplinary action for the mistreatment of SMEs by its notorious Global Restructuring Group (GRG) due to a lack of regulatory authority, Royal Bank of Scotland’s chief executive has now appealed for small business lending to be formally regulated in the UK.

RBS was let off the hook due to the historical lack of oversight of SME lending, even though the Financial Conduct Authority itself earlier this year accepted that the Edinburgh-based bank’s GRG had treated customers unfairly after companies said the bank of pushed them into bankruptcy to strip them of assets.

However, in July the City watchdog found its powers to be “very limited” over the scandal and did not have the authority to punish the still more than 60 per cent state-owned lender.

“It is important to recognise that the business of GRG was largely unregulated and the FCA’s powers to take action in such circumstances, even where the mistreatment of customers has been identified and accepted, are very limited,” FCA chief executive Andrew Bailey said at the time.

While the FCA has since proposed expanding the Financial Ombudsman Service (FOS) to small businesses, the Treasury Committee has questioned whether the FOS can handle an expanded remit.

Now weighing in on the subject in an interview this week with the Press Association, RBS boss Ross McEwan said “I think somebody needs to be there to put a second view around the SME market place”, while also warning that UK authorities need to be “careful” over putting UK banks at a disadvantage by over-regulation.

“This industry needed to be pulled back into line to consider customers again and to be financially strong, so I think the regulators have done the right thing,” he said. “What we need to be careful of now is that we stay competitive with other regulatory frameworks around the world.”

However, he added that he “very strongly” supports moves meant to increase capital levels in banks and impose better controls around customers.

“These are our customers, we should have been taking the concern for them, and unfortunately it’s taken a regulator to … tell us how to run our industry, which I think is a blight on our industry, not on the regulators.”