Business Secretary Vince Cable has passed evidence of Royal Bank of Scotland’s treatment of small businesses to City watchdogs amid allegations that the bank seized assets from firms to benefit its own property empire.
The taxpayer-backed lender is facing a series of damning accusations over its handling of small businesses in a report due to be published today by businessman Lawrence Tomlinson, who acts as entrepreneur in residence at the Department for Business, Innovation and Skills.
Mr Cable confirmed he has referred the report to the Financial Conduct Authority and the Prudential Regulation Authority, as well as RBS and Sir Andrew Large, who is also due to publish his full RBS-commissioned review into small business lending at the group this morning.
The bank faces further allegations of mistreatment reports that a “hit squad” existed within RBS that has driven businesses into financial difficulty through punitive fees and charges and then scooped up their property at rock-bottom prices.
Mr Tomlinson said: “There is a wealth of evidence which suggests that RBS has forced healthy, vibrant businesses into financial trouble and … seized their assets to benefit its own vast property empire.”
Mr Cable said: “Some of these allegations are very serious and I am waiting for an urgent response as to what actions have been taken.”
It is understood the allegations focus on the bank’s Global Restructuring Group (GRG) lending division, which handles loans classed as being risky.
The bank has been accused of pulling finance for many small businesses that had not missed loan repayments and were trading through the recession.
The GRG unit is understood to have the power to scrap loan deals, impose inflated interest rates and charge hefty penalties.
An RBS spokesman said GRG’s role was key to helping the bank face up to its commercial property “mistakes” made in the run up to the financial crisis.
He said: “In the boom years leading up to the financial crisis, the over-heated property development market became a major threat to the UK economy.
“RBS did more than its fair share to fuel this and commercial property lending was one of the key drivers of our near collapse as valuations rapidly plummeted.”
The group said it was “already committed” to an inquiry on how it treats small firms.
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