Mis-Selling Derivatives Scandal: Guto Bebb Demands Independent Review of RBS Alleged Squeeze of SMEs

Guto Bebb MP, the chairman of the All-Party Parliamentary Group on Interest Rate Hedging Products, has called for an independent review into the Royal Bank of Scotland after a government adviser slammed the bank for engineering businesses into default while also profiting from their struggles.

Bebb, who is the MP for Aberconwy in Wales, told IBTimes UK that it was unsatisfactory that RBS intended to conduct an internal review of its behaviour following the adviser's accusations and has called for an independent inquiry.

"I am appalled by RBS's weak reaction to The Tomlinson Report. It was clearly set out in the report that conflicts of interest were a key problem within our current banking sector and yet RBS have inadequately agreed to hold an internal investigation," said Bebb.

"We need an independent enquiry. Large law firms cannot be expected to independently review the banks while heavily dependent on their business. There is a clear conflict of interest.

"Time and time again we have seen that the banks cannot reliably investigate its own behaviour without causing significant fall back later down the line. It is disheartening that the tax payers will once again have to bear the brunt of bank misconduct but this would be a worthwhile and justified investment of money if there was confidence in its conclusion.

An independent inquiry, removed entirely from the grasp of the bank, would give affected businesses faith in the impartiality of the review."

RBS Accusations

RBS drafted in heavyweight lawyers to review the treatment of small-to-medium sized enterprises after a government adviser slammed the bank for engineering businesses into default while also profiting from their struggles.

According to a statement by RBS' newly installed chief executive, Ross McEwan, the bank has appointed Clifford Chance to help its inquiry into the treatment received by SMEs in financial distress.

"To ensure our customers can have full confidence in our commitment to them I have asked the law firm, Clifford Chance, to conduct an inquiry into this matter, reporting back to me in the new year," said McEwan.

Lawrence Tomlinson, an adviser to business secretary Vince Cable, slammed RBS for engineering businesses into default after moving them into its Global Restructuring Group (GRG).

He added that the 81% government-owned RBS also profited from their struggles as by moving them into GRG, this can create more revenue for the bank through higher fees and margins.

It can also result in the purchase of devalued assets by its property division, West Register.

Tomlinson runs LNT Group, based in the north of England which has annual revenue of £100m and has interests in construction, software, car manufacturing, and care homes.

Mis-Selling Derivatives

While Tomlinson's came as a shock to many market participants, Bebb said the "severe mis-treatment of SMEs" came as no surprise to him.

Bebb established the APPG on interest rate swap mis-selling over a year ago in order to examine and address the impact of mis-sold interest rate swap products to UK small and medium sized businesses.

"We have repeatedly called upon the Financial Conduct Authority (FCA) and the banks to pick up the pace and address ongoing concerns with the redress scheme currently in place. Businesses continue to suffer while the banks move at a snail's pace," said Bebb.

"This is just another tragic example of the banks' unwillingness to support the small and medium businesses in Britain which are so vital to the recovering economy."

In May this year, IBTimes UK conducted a special investigation into businesses that claim Britain's biggest banks were wilfully engineering SMEs to fall into default.