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Andrew Large criticises RBS over treatment of SMEs

Date Added: 03/01/2014  

The former Bank of England deputy governor, Sir Andrew Large, has said some small and medium-sized enterprises (SMEs) have been "treated roughly" by Royal Bank of Scotland (RBS) and he denounced the “flawed” way its controversial turnaround division operated.

RBS commissioned a review of its lending practices after Lawrence Tomlinson collected a file of evidence apparently demonstrating that the bank had ruined SMEs in order to make profits.

He said: “There are many devastating stories of how RBS has wrecked good businesses and the ruinous impact this has on the lives of the business owners.”

Mr Tomlinson made allegations that the Global Restructuring Group (GRG) worked closely with a property unit within the bank that handled the disposal of assets of distressed companies.

When writing the report, Sir Andrew said the bank’s small business lending had "failed", he added: "There will certainly be cases where SMEs have been treated rather roughly. I very much hope there aren't any in the extreme category that may have been put out of business altogether.”

Sir Andrew made it clear that RBS’ problems and failure to expand its SME lending were diverse.

He added that the bank’s fixation on building up real-estate lending in the run up to the recession left the group bereft of the skills needed to analyse other types of businesses.

"Up to 2008 the cry was 'we want more assets and we want real-estate assets' and the skills needed to acquire real-estate assets are quite different from the skills needed to look at SMEs, where you are having to understand their business, understand their cashflow and so on," he said.

Sir Andrew strongly disagreed with some of Mr Tomlinson's conclusions, such as the recommendation that the state controlled RBS and Lloyds should be split into six new banks to encourage more lending.

The allegations made by Mr Tomlinson are currently being considered by the Financial Conduct Authority. 

Meanwhile RBS has commissioned law firm Clifford Chance to look at the contents of Sir Andrew's report.

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