For many weeks now, thousands of small business owners who suffered mistreatment at the hands of a rogue unit of Royal Bank of Scotland have had a simple question: why can’t we see the Financial Conduct Authority’s report on the matter?
The chief City regulator published a summary of the report last week, almost four months after extracts of it were leaked, but the full version – to the frustration of those businesses affected – remains under wraps.
Now we know why.
According to The Times, which has seen minutes of an internal boardroom meeting at the FCA, the regulator received legal advice that to do so would expose it to an “unacceptable risk of successful legal action by current/former RBS managers”.
That legal advice appears to have overcome the FCA’s own private desire to publish the report in full on the basis that it would increase transparency and reduce the risk of the regulator being accused of trying to water down the report.
This clearly creates an ugly impression.
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It has led to accusations from both Conservative and Labour MPs that the FCA is, in some way, cowed by the banks that it regulates.
Bill Esterson, the shadow business minister, has called for intervention by the Government.
While clearly most sympathy must reside with those mistreated by Global Restructuring Group (GRG), a unit of RBS that was supposed to help struggling small business customers turn themselves around but which instead tipped many of them into administration, there must also be some sympathy with the FCA.
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Its chief executive, Andrew Bailey, told the Treasury Select Committee in September – shortly after extracts of the report were leaked – that the FCA’s ability to carry out future so-called “section 166” reports, like the one into GRG, would be compromised by publication of the full report.
He wrote to the committee: “They [section 166 reports] are conducted on the basis that there is no intention to publish, and it is our view that this greatly facilitates the efficiency of the process.
“Typically, it does not, for instance, mean that firms seek to withhold information and we are not required to use our legal powers to deal with such situations. I am very keen that this…should continue.”
Image: FCA boss Andrew Bailey said releasing findings in full could compromise its ability to carry out future reports
This was cited by Ross McEwan, the RBS chief executive, when he was asked last week whether the full report should have been published.
He told Sky News: “I think the summary – which has had a Queen’s Counsel look through it on behalf of the Treasury Select Committee – did reflect fairly what was in the report.
“The danger of putting out what we call these s166 reports is, once you’ve put one out, how many do you put out going forward?
“So I think that’s the reservation, as opposed to this specific report.”
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Mr McEwan also insisted RBS was trying to put right the damage done to those customers who were mistreated.
He added: “Clearly we didn’t get everything right here – there are some things we have apologised for, there are some actions that we are taking, such as putting in place a proper complaints process that is sat over the top of by a High Court judge, so that we look at every case and say ‘did we get this right or wrong?’ and if we got it wrong, putting it right.
“We’ve also gone through 3,500 of the customers that were in this Global Restructuring Group and refunded, with interest, all of the complex fee structures that they paid as well.”
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The bank has put aside £400m to compensate customers found to have been mistreated.
So what is the solution? Well, the most obvious one would be for RBS itself to say it does not have any objections to full publication.
However, that would still not get around the risk pinpointed by the FCA, that it might be sued.
And there is an additional problem, also flagged by the FCA, that publication could be slowed by the right of individuals named in the report to read in advance what is being said about them and, if they disagree with it, raise formal objections.
This is a process known as “Maxwellisation” after the crooked tycoon Robert Maxwell successfully sued the old Department of Trade & Industry in 1970 for publishing a report that was critical of him without showing him the report beforehand.
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That is why the Treasury Select Committee called in December last year for a crackdown on the way in which some bankers have apparently successfully used the “Maxwellisation” process to water down official reports that are critical of them and their institutions.
It is a reform that looks overdue.