A guest blog by Alison Loveday, chief executive of berg, a Manchester-based law firm helping businesses affected by GRG
The Global Restructuring Group (GRG) was a restructuring division set up by the Royal Bank of Scotland. The group was said to have been set up to help support struggling businesses with the intention of turning them around.
Once a customer was in GRG, the bank would regularly impose fees on these businesses, varying from “management fees”, “valuation fees” and “increased interest charges”. These fees put additional pressure on small businesses, resulting in many being forced into insolvency. It was alleged that RBS would, in some instances, then sell the assets of these businesses on to other customers and divisions of the bank such as West Register, at a significantly reduced price.
Despite being set up in the ‘90s, GRG has continued to hit headlines and affected businesses are still fighting for compensation from the bank. berg, the Manchester-based firm representing a number of legal claims against RBS, have recently published their Banking Report 2016 which looks extensively into what has happened within the GRG scandal and what developments there have been in this on-going saga.
Here are some of the important highlights from the report.
Where are we now?
On 8th November 2016, RBS made an announcement that it had put aside £400m in order to repay complex fees to businesses who had been caught up in their GRG division. Whilst this will help compensate customers who have suffered, the many delays and RBS’s continual denial of any culpability has led to frustration from customers.
On the same day, the FCA released a summary of the findings of its section 166 report and commented that it had welcomed RBS’s announcement. Unfortunately, the FCA has not released the report in full, stating that it is complex and lengthy.
The FCA summary
The summary of the FCA report concluded that RBS hadn’t set out to intentionally engineer a position to cause or facilitate the transfer of customers to the GRG division. However, it found that GRG had failed in a number of other ways.
- It failed to support SME businesses in a consistent manner and didn’t comply with its own communications policy
- A failure to explain the reasoning behind decisions relating to pricing
- It failed to ensure that appropriate valuations were made
- It failed to adopt correct procedures which concerned the relationship between customers, which didn’t ensure the fair treatment of customers
- It failed to handle customer complaints fairly
- It was unable to exercise the correct safeguards and procedures
As the FCA has refused to provide clear and consistent information, there has been a serious lack of transparency throughout the process − all of which has added to the frustration felt by those affected by GRG.
However, the FCA is not legally obliged to disclose the full report and it is not clear if it ever will. In their November summary, the FCA stated that it would “publish a full account of its findings when practicable, once our work is concluded”.
Should the FCA choose not to disclose the report in full, an application to court could be considered. The disclosure of the report could help to provide further evidence that SME’s could use against the bank in their claims − which is potentially why the FCA has decided not to disclose the full report.
How has GRG affected RBS?
There has been widespread criticism regarding RBS’s position and how they have handled the entire GRG situation. Whilst they have put aside £400 million for those affected, many believe it is not enough, in fact the figure’s £100 million less than was estimated by international specialist banking and asset management group, Investec.
RBS has consecutively lost money for the past eight years, which has amounted to a deficit of around £50 billion. The impact of GRG has played a key role in these losses, along with bad loans and litigation costs.
In August 2015, the government sold £2.1 billion of RBS shares at 330p each. Since then, RBS shares had continued to plummet and lose their value, even dropping below 150p at one point. Despite this, on the back of their November announcement, RBS shares were up slightly at 187.3p.
How RBS broke British businesses
Ben Marlow from the Telegraph stated that RBS may be facing their most damaging scandal yet, whilst RBS chairman, Howard Davies, said in an interview with CNBC that the bank had to deal with a lot of distressed businesses. Davies added that “in some cases that was not done as well as it should be, the people were not communicated to properly, people did not understand what was happening to them.”
Leaked files found that RBS had crushed many British businesses for profit by stripping their assets − in a deliberate and premeditated strategy − to strengthen their own profits. The leaked files were part of a Buzzfeed article and a BBC Newsnight investigation, both of which berg took part in. Despite RBS’s claims that it had not intentionally damaged businesses, the leaked files showed a deliberate process was adopted by the bank to improve its own position.
There are number of different claims processing through the courts at the moment, and the verdicts of these cases will set a precedent for other claims. The Property Alliance Group (PAG) v RBS case is examining whether RBS wrongfully engaged in unlawful conduct whilst PAG were in GRG and the verdict is still awaited.
What can you do if you were affected?
If you and your business have suffered as a result of GRG and RBS’s actions, you could be entitled to compensation. Following on from the FCA summary findings, it’s important to act now to ensure the best possible outcome as details are unclear on how the new complaints review process will operate.
Take a look at berg’s Banking Report 2016 for more information on the GRG position and what is likely to happen next.
The legal experts at berg have helped to secure compensation for businesses across the UK. Get in touch with them for a no obligation consultation and to speak with their team of experts.