FCA boss defends watchdog’s lack of action against RBS’s turnaround unit

Andrew Bailey has defended the Financial Conduct Authority’s lack of action against Royal Bank of Scotland over the way it treated small firms in its now-defunct turnaround unit.

The boss of the City watchdog used a speech delivered at the FCA’s annual public meeting to address its recent decision to hold off disciplining anyone at RBS after concluding that the Global Restructuring Group’s (GRG) activities were not within its remit and that its powers did not apply.

Senior management were also off the hook after the FCA said action over lack of fitness and propriety “would not have reasonable prospects of success”.

“It is important to recognise… that the business of GRG was largely unregulated and the FCA’s powers in such circumstances are therefore very limited”, Mr Bailey said in his speech on Tuesday.

“After considering all the evidence we concluded that our powers to discipline for misconduct did not apply and that any action in relation to senior management would not have reasonable prospects of success.

“Because of the importance of the issue, we had this conclusion ratified by independent senior counsel.

“I recognise the frustration this decision caused to GRG customers, but I’d like to make clear that we explored all the options available to us before arriving at this conclusion.”

Mr Bailey promised to release more details on how the decision was reached, and offered assurance that the FCA was keeping abreast of the ongoing complaints process over GRG, which has been accused of pushing firms towards failure in the hope of picking up assets on the cheap.

The FCA’s ruling earlier this summer has been criticised by the likes of the SME Alliance – a small business group that lobbies for fair treatment by banks and advisers – which is now launching its own investigation into RBS’s GRG.

SME Alliance director Nikki Turner said: “We will study the detail behind the FCA’s decision not to pursue any bankers over the scandal at RBS GRG with a fine-tooth comb.

“The inability of the FCA to find evidence that would lead to RBS bankers being held to account is the reason why we are conducting our own investigation

“We trust that the investigation into HBOS Reading will not deliver such a disappointing outcome.”

Mr Bailey also used his speech on Tuesday to address progress on two HBOS cases, including its investigation into former senior managers of the failed bank after a 2015 review found its top brass were ultimately responsible for its demise.

He said a substantial amount of information has been gathered and that new, potentially relevant documents are now being obtained.

While there is “considerable public interest” in the investigations, Mr Bailey stressed that “significant resources and time” were being committed to the case.

“Investigations like these, into events that took place a number of years ago, can take longer than is often appreciated. We are, though, committed to completing them as soon as possible.

“It is, however, frustrating that certain parties have determined to reveal the existence of more documentation at such a late stage.”

The city watchdog’s second HBOS investigation relates to “extent and nature of the knowledge” of misconduct within the Reading branch, as well as it communications with the FCA’s predecessor the Financial Services Authority after the issues were discovered.

“We are nearing the end of our investigative review and considering what action is appropriate.

“The timings for the completion of our review are subject to any additional relevant material being identified within the records that are still being provided to the HBOS individuals investigation,” Mr Bailey said.