IT must seem hard to believe, but there was a time when RBS was regarded as a model bank.
Today, it’s a bailed out, errant child that is struggling to mend its ways.
Yesterday its reputation was damaged even further with the revelation that it’s been fined by the regulator for selling mortgages without checking if customers could afford them. It’s a hammer blow to chief executive Ross McEwan’s efforts to repair the bank’s image.
The Financial Conduct Authority fined RBS £14.5m for failing to ensure advice given to customers between June 2011 and March 2013 “was suitable”.
In one “highly inappropriate” case an employee warned that interest rates could soar to 5.5 per cent while trying to push a five-year fixed rate home loan deal, the Financial Conduct Authority (FCA) found.
The FCA’s predecessor, the Financial Services Authority (FSA) first raised concerns about branch and telephone sales at RBS and its NatWest business in November 2011 but no proper response began until the end of September the next year.
It’s not the first time that RBS bosses have been hauled over the coals.
The mortgage failure is particularly embarrassing for Mr McEwan because, unlike other scandals to hit the bank, it happened on his watch.
Worryingly, the regulator found that only two out of 164 sales it looked at met the required standard.
RBS sold 30,000 mortgages during the period under review by the FCA.
Mr McEwan has vowed to make RBS, which lost £8.2m last year, the “best customer service-oriented bank in the UK”, but his efforts are being hampered by various ongoing investigations into past misconduct.
RBS is among several major banks assisting regulators around the world investigating allegations of collusion and price-rigging in the global currency market. The bank has already been fined £390m for its role in fixing the benchmark London interbank offered rate (Libor) and has set aside £3.2bn to compensate customers mis-sold loan insurance.
RBS has been hit with eight fines from the City regulator since 2002, with the penalties adding up to £131.8m.
The failings at RBS came before tighter rules on mortgage lending took effect in April.
They require banks to check more closely that borrowers will be able to afford loan repayments if interest rates go up.
The bank’s relationship with small businesses has already come under critical scrutiny.
Last year, Lawrence Tomlinson, the Yorkshire entrepreneur, and former Government advisor, published a scathing report on the way RBS managed its relationships with some small businesses.
Last month, he welcomed the bank’s admission that its corporate turnaround division was used as a “profit centre”.
Last year, Mr Tomlinson claimed that RBS had engineered businesses into default to move them into its Global Restructuring Group (GRG). The GRG unit is meant to help RBS’s corporate clients who find themselves in financial distress to return to health.
RBS’s deputy chief executive Chris Sullivan and GRG head Derek Sach told the Treasury Select Committee that the division was not used as a “profit centre” when they gave evidence in June, contradicting the findings of a report by former Bank of England Deputy Governor Andrew Large.
However, in a letter to committee chairman Andrew Tyrie Mr Sullivan said RBS now accepted Mr Large’s description. An independent review found no evidence the bank had set out to defraud customers, but the unit is still being investigated by the financial regulator.
RBS must take radical steps to show that it has finally placed its house in order.
The latest fine shows that senior management still need to get a grip.
Every time the bank is fined by the regulators a little more of its credibility drains away.
As taxpayers we have a massive stake in RBS. We all deserve much better than this.