How independent is the latest RBS investigation into GRG?

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Posted in:Banking and Finance|August 13, 2015 | Join the mailing list

Following an announcement on the 22 July 2015 that RBS has appointed external advisors to launch an investigation into the treatment of small business customers, it has been revealed that RBS has instructed two law firms, Denton Wilde Sapte and CMS Cameron
McKenna and accountancy practice PWC.

According to The Times report on 10 August 2015, the trio are instructed to review tens of thousands of businesses that were transferred to RBS’s Specialist Turnaround Division, the Global Restructuring Group (“GRG”).

GRG is facing various allegations that it mistreated its customers by exposing them to increased fees and interest rates, threatened or caused actual insolvency of businesses, sold business assets at an undervalue and “artificially engineered” defaults of facilities
to justify customers’ transfer into GRG, amongst other things. The FCA is due to publish their report on GRG following its “s.166 investigation” towards the end of this year.

The Times reports that the appointed companies do not have strong ties with the Bank. However, berg is aware that Denton Wilde Sapte has and continues to defend a number of large and high-profile actions against GRG on behalf of the Bank.

CMS Cameron McKenna has also advised other Banks in relation to the activities of their Specialist Turnaround Divisions which are also under scrutiny (although only GRG is part of the current FCA investigation).  

PwC have historically helped banks prepare Independent Business Reviews (“IBRs”) which are often alleged to be precursors for businesses being transferred into GRG.

The Times report that the 3 companies have been instructed “to help to prepare the bank’s senior management for the outcome of the inquiry." Many ex-GRG customers claim to have been unfairly treated at the hands of GRG but are struggling to take action due
to lack of funds to instruct even one advisor. In contrast, the Bank has three top-tier companies which demonstrate the inequality between the Bank and the SMEs which has characterised the relationship between GRG and its customers.

This is not the first report commissioned by the Bank in relation to GRG. berg has already challenged the veracity of the April 2014 Clifford Chance report. As reported in berg’s recently
published Banking Report 2015: Lifting the lid off lending
, Clifford Chance was less than critical of the Bank’s actions and so customers had no confidence in the supposed independence of the report.

Given the companies’ history of working with the Banks, is this investigation truly independent?  We hope that this new report does not follow its predecessors and that the Bank is now ready to pay out compensation to the thousands of businesses affected by
the actions of GRG.

If there are any issues in this update or more generally that you would like to discuss, please contact one of our Banking and Financial Regulatory team on 0161 829 2599.

(The information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Berg or any of its partners or employees. Professional legal advice
should be obtained before taking, or refraining from taking, any action as a result of this article.)

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