Bank has failed to support SMEs, says review

Royal Bank of Scotland headquarters in Edinburgh.

The review, led by former Bank of England deputy governor Andrew Large, said RBS’s market share of small business (SME) lending had fallen steeply from 2010 and would continue to fall below the level expected given its number of customers.

The review attributed much of the decline to the fallout from RBS’s £45.5bn bailout in 2008, which left taxpayers holding an 81 per cent stake. RBS has since focused on selling off or winding down its riskiest loans in order to strengthen its financial position.

RBS’s total lending to small businesses was £55bn when the market was at its height in early 2009 and has since fallen to £38bn, the review said. Its market share of small business lending among high street banks has fallen to 33 per cent from 40 per cent at the peak.

“RBS deserves credit for the way it has tackled some of the shortcomings in its SME business during a period when the group was battling for survival. However, there is much that still needs to be done,” Mr Large said.

The review said loan applications at RBS took longer than at other banks and the process needed to be simplified and accelerated. Communication with customers needed to be improved and safeguards had to be put in place to ensure businesses in financial distress were treated appropriately.

RBS chief executive Ross McEwan said he accepted the review’s recommendations and would act on its findings. He promised to take immediate steps to improve the bank’s support for small businesses and Britain’s economic recovery.

RBS appointed Mr Large, a former deputy chairman of Barclays, and management consultants Oliver Wyman to conduct the review in July, having come under pressure from MPs to lend more.

Yesterday, Sir Philip Hampton, the bank’s chairman told the Yorkshire Post that RBS took on board Mr Large’s recommendations. He added: “We have taken a decision to make it public. You could argue it’s a brave step. We believe it’s right that we do this.”

He stressed that no member of the board was a political appointee, and added: “We wouldn’t do anything for party political purposes.” A spokesman said RBS had 80,000 business customers in Yorkshire and the Humber, with £2bn in committed lending.