RBS cleared of defrauding businesses following government advisor complaint

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RBS, which still faces a second investigation by City regulator the FCA, handed over £1.5million of taxpayers’ money for an investigation by top City lawyers Clifford Chance into allegations made by businessman Lawrence Tomlinson.

These centred around its Business Restructuring Group (BRG) that deals with distressed firms in the UK.

Tomlinson dismissed the report as a whitewash, saying: ‘It is not surprising they have not found any clear evidence of fraud, which is not something I have ever accused the bank of.

‘I look forward to the FCA publishing their findings later this year as their scope is much more robust, far reaching and, of course, independent.’

Despite apparently having been exonerated by Clifford Chance, the bank is winding down its controversial West Register, which figured strongly in the Tomlinson dossier.

West Register – which bought property from 166 small firms during the financial crisis at an average of 50 per cent of the original valuation – was accused of acquiring property on the cheap from troubled companies and selling it on at a profit.

RBS said it would run off West Register’s £900million UK property portfolio – £400million of which originally belonged to small business customers – because of the ‘damaging perception’ of a conflict of interest.

Clifford Chance found no evidence that the bank had engineered the default of its customers or that it had deliberately undervalued firms’ property assets. But the law firm stopped short of giving the bank a clean bill of health.

It criticised the fees charged to ailing firms at a time when they can least afford to pay as being difficult to understand. RBS has undertaken to make them clearer.

The law firm also urged RBS to ‘revisit’ a reference in a training manual about exerting ‘leverage’ over customers by reminding them that the bank can remove overdraft facilities whenever it likes, even if a firm had not missed any payments.

Tomlinson, whose findings were published late last year, was appointed ‘Serial Entrepreneur’ at the Department of Business in 2013 for a 12-month term. He launched his inquiry on his own initiative after receiving complaints from customers.

RBS’s troubled firms’ division saw a total of 10,000 small companies pass through its portals during the crisis, of which around a thousand became insolvent.

‘These were the most serious allegations RBS has faced since the financial crisis and this has caused profound damage to our brand,’ said Jon Pain, the lender’s group head of conduct.

Pain said the distressed business unit had not profited out of its customers but made a ‘thumping loss’ every year since 2008.
Business Secretary Vince Cable said: ‘The report contains some important lessons for the bank, which is taking some decisive actions as a result.’

RBS is now reported to have said it cannot rule out legal action against Tomlinson for Libel after being “cleared” of the report’s most damaging allegations. However Tomlinson has counted by saying: “The Clifford Chance report does not exonerate RBS. That seems to be a deliberate misdirection away from Clifford Chance’s real findings.”

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