LET me start with a chilling thought.
Have some powerful figures become untouchable because our regulatory system is so feeble?
We might like to think that we live in a mature, civilised democracy, where there is no hiding place for those who abuse their position of power. But the events of the last few days must make us wonder if elements of our regulatory system are simply not fit for purpose.
On Tuesday, it was revealed that Royal Bank of Scotland and its senior managers will not face disciplinary action over the treatment of small firms in its global restructuring group. The Financial Conduct Authority (FCA) said it had concluded that its powers to discipline anyone for misconduct do not apply and added that action against senior management in the global restructuring group for lack of fitness and propriety “would not have reasonable prospects of success”.
It said it had taken legal advice on its decisions, which found that GRG’s activities were not within its remit and confirmed “the FCA’s conclusions are correct and reasonable”. There was a furious reaction from Kevin Hollinrake, who is co-chairman of the All Party Parliamentary Group on Fair Business Banking (APPG), and a long standing critic of the current regulatory system.
Mr Hollinrake said: “The FCA should release all findings and evidence they have obtained in their investigation of RBS GRG, unredacted so that the individuals who are responsible for this misconduct are in the public domain.”
Mr Hollinrake wants assurances that anyone responsible for mistreating SMEs is held to account. If the FCA is to retain any credibility, it must let MPs see all the evidence it has compiled about RBS and its global restructuring group.
An independent report into GRG by Promontory Financial Group was finally published earlier this year, showing that there was “widespread inappropriate treatment of customers” inside the unit. However, it said there was no evidence that “defaults were engineered to transfer businesses to GRG simply to generate revenue for RBS through fees”.
The FCA also said it found no evidence of dishonesty or lack of integrity. But Andrew Bailey of the FCA, said: “The fact that we can’t take action in no way condones the behaviour of RBS.”
In 2017, Mr Bailey told me that the UK lacked an adequate resolution system for SMEs with complaints about banks. A year and a half later, no real progress has been made to solve this problem. It’s unsurprising that MPS are fuming. It’s also no surprise that many SMEs are turning their backs on some of the banks.
Damon Walford, the chief development officer, at SME lender ThinCats, said: “Banks have spent hundreds of millions of pounds since the financial crisis trying to rehabilitate their brands and distance themselves from their pasts. But SMEs have long memories and many are now bypassing banks altogether to access the capital they need to grow.”
The UK’s financial regulatory system is facing a crisis of confidence. To quote the APPG: “It is clear that the FCA do not have the powers to adequately investigate and discipline instances of misconduct to a degree which gives victims any confidence.”
It is time to abolish the FCA and start again. We need a tough tribunal which is answerable to consumers and Parliament.
It must force bankers to give evidence under oath and have the power to hand out lifetime bans to the worst offenders. Our timid regulatory system must be consigned to history.