RBS accused of ‘killing off’ small businesses

A damning report claims that state-backed banks are deliberately driving small businesses, including successful farming businesses, to ruin.

Entrepreneur Lawrence Tomlinson was asked by the government to look into the lending practices of banks to small businesses.

State-backed banks RBS and Lloyds face allegations of “unscrupulous” treatment of their customers.

The dossier, published on Monday (25 November), claims that RBS, which is 80% owned by the taxpayer, put some viable businesses into default so that it could make a profit.

It alleges that the bank’s “turnaround” lending division Global Restructuring Group (GRG), which handles loans considered more “risky”, drove firms to the wall so that the bank could seize their properties.

The report, set up by business secretary Vince Cable, received evidence from small businesses that the GRG division withdrew loans and imposed massive interest rates and fees, running into tens of thousands of pounds.

One business told Mr Tomlinson it paid £256,000 in fees alone, while another said it was forced to pay a sum of £40,000 to continue lending.

In a section titled “Lack of Redress”, the report cites an example of a collapsed farming business.

“For those within the FCA [Financial Conduct Authority] review process who have been considered ‘unsophisticated borrowers’, no compensation can bring back what they have lost, the banks are dragging their heels on consequential damages but even if awarded, the business will never get back what they have lost,” the report states

“Once the family farm has been sold, it cannot be recovered and the business owner feels like a failure despite the fact that this is solely due to a product that had been inappropriately sold to them, as they have lost their children’s inheritance.”

Mr Cable said he was taking them “very seriously”. He has passed on the report to financial regulators the FCA and the Prudential Regulation Authority (PRA).

In a statement, RBS said: “In the boom years leading up to the financial crisis, the overheated property development market became a major threat to the UK economy.

“RBS did more than its fair share to fuel this and commercial property lending was one of the key drivers of our near collapse as valuations rapidly plummeted.

“Facing up to these mistakes has been a difficult, but essential, part of making RBS a safe and strong bank once again. That has been one of GRG’s main tasks.

“GRG successfully turns around most of the businesses it works with, but in all cases is working with customers at a time of significant stress in their lives. Not all businesses that encounter serious financial trouble can be saved.”

A spokesman for Lloyds said: “The specific practices discussed in the report are attributed to another bank and are not a reflection of Lloyds Banking Group’s approach.”

Have your farming businesses been affected by similar issues covered in this story? Email your comments and experiences to philip.case@rbi.co.uk or telephone the newsdesk on 020 8652 4905.

More on this topic

Farmers face long wait for bank mis-selling deals

Futures contracts: farmer views wanted

Do you use futures and options markets to help you manage risk? Or are you interested to learn more? Farmers Weekly is keen to find out the extent to which UK farmers use these markets. Complete our survey here.

Take the survey

Futures markets and commodity risk management online course:

  • Risk management strategies for a more predictable financial performance
  • Educated conversations when collaborating with your advisors
  • Negotiate better prices with your grain merchants

View course
See more