RBS set for lawsuit following FCA investigation

The headquarters of the Royal Bank of Scotland in the City of London. Credit: PA

Ever since Ross McEwan took over as chief executive of Royal Bank of Scotland (RBS) in 2013, he's had to contend with persistent allegations that from 2008 to 2013 the bank systematically defrauded thousands of its small business customers.

The FCA investigation into what happened at RBS's Global Restructuring Group (GRG) is ongoing, but this morning a report they commissioned has been published.

They found "widespread inappropriate treatment" of small and medium-sized enterprises (SMEs), but no evidence it was deliberate or coordinated.

We were told the 12,000 businesses that ended up in the restructuring unit were there because they were in serious trouble; the report by Promontory estimates that one third of them were already bust and beyond saving.

RBS has already admitted mistakes were made at GRG and apologised once again this morning.

Their 4,000 customers who were charged fees are to be reimbursed (although the bank admits it doesn't know how many are still in business) and an independent complaints process is being set up, run by a retired judge.

The total redress will cost the bank £400 million.

RBS says this is about doing the right thing for customers, but it's not clear why the bank hasn't acted sooner.

RBS's own review of what went on at GRG, carried out by Clifford Chance, identified similar failings two and a half years ago.

The invisible hand of the FCA? Perhaps.

Waiting in the wings are 506 business who plan to sue RBS for considerably more than than £400 million.

Their class action is seeking £2 billion, and Howe & Co - who have been appointed to act on their behalf - insist the case will go ahead amid cries of "whitewash".

People walk past a Royal Bank of Scotland office in London. Credit: Reuters

However they will also have to recognise that what we know about the FCA investigation so far offers most comfort to RBS - unless the regulator knows the Promontory review failed to uncover.

To-date no one has managed to uncover compelling proof that RBS sought to force businesses to close so the bank could make money - but there's plenty of evidence of widespread of bad-practice.

Who was responsible for the failings?

It's a lingering question. As it stands the bank hasn't publicly held anyone accountable.