FCA colluded to cover up alleged HSBC fraud

January 23, 2015 By Ian Fraser

HSBC_2544376bWhen John Griffith-Jones and Martin Wheatley, chairman and chief executive of the Financial Conduct Authority, appear before the Treasury Select Committee at 9.30am next Tuesday, 27 January, the 13 MPs on the committee have an unprecedented opportunity to establish whether the FCA, just like its predecessor the FSA, is colluding with banks to cover up alleged fraud.

The MPs will almost certainly ask the regulator’s top bosses about obvious failures like the FSA’s “review” of the “misselling” of interest rate hedging products to SMEs by British banks, a review the regulator  outsourced to the guilty banks, thereby denying many small companies either a fair hearing or any real opportunity for proper compensation or justice (see my The Times article from September 2014)

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Pressure grows on banks over loans

Pressure grows on banks over loans

  • RBS says some customers were misled Andrew Cowie/AFP/Getty Images

High street lenders and the government are under pressure to review a taxpayer-backed lending scheme after Royal Bank of Scotland admitted that it had misused the Enterprise Finance Guarantee.

Labour joined small business groups in calling for a broader inquiry into banks’ use of the EFG after an internal investigation at RBS revealed serious failings in how it explained the scheme to customers.

The EFG, which has facilitated more than £2.3 billion in funds to small businesses since its launch in 2009, provides a 75 per cent government guarantee to banks willing to back small companies that lack the security for a conventional loan.

Last week The Times revealed that RBS would conduct a “loan by loan” review of its use of the EFG after it admitted that some customers were misled that the state guarantee was for the borrower’s benefit. The guarantee is only for the lender, with customers remaining liable for the entire unsettled value of the loan.

Lloyds, HSBC and Barclays do not have plans to review their use of the scheme, all highlighting that they are subject to regular audits by the state British Business Bank, which runs the EFG.

However, Andy Keats, who co-runs the Serious Banking Complaints Bureau, said that he had been approached by EFG borrowers from all the main high street lenders complaining about how the scheme had been explained.

“I’m pleased that RBS has held its hands up,” he said. “This will put pressure on other lenders who have been doing exactly the same thing. It’s disgraceful that 100 per cent of liabilities have been claimed from people on a loan that was mis-sold in the first place.”

We mis-sold taxpayer-backed loans to small businesses, confesses RBS

We mis-sold taxpayer-backed loans to small businesses, confesses RBS

Clive May complained about the way his bank mishandled a £245,000 overdraft

Clive May complained about the way his bank mishandled a £245,000 overdraft

  •  JILL JENNINGS/Times Newspapers Ltd James Hurley Published at 12:01AM, January 15 2015

Royal Bank of Scotland has admitted that it mis-sold taxpayer-backed loans to small businesses.

An internal investigation at the lender has revealed serious failings in the way in which it used the Enterprise Finance Guarantee, a government scheme designed to boost lending to smaller companies.

RBS said that it would conduct a full “loan by loan” review of its use of the EFG, which has provided more than £2.3 billion to businesses since it was launched in 2009, and added that any customers adversely affected by the mis-selling would be compensated.

The issue is understood to have contributed to the unexpectedly early departure of Chris Sullivan, the deputy chief executive of RBS, who left the bank on December 31.

RBS is also planning to run an “accountability review” into the mis-selling, meaning that other senior roles could be at risk. The problems came to light after complaints from small businesses and an investigation by The Times, which highlighted allegations that customers were being misled by high street banks over the nature of the EFG.

The scheme provides a 75 per cent government guarantee to lenders willing to support viable small businesses that lack the security to obtain a bank loan. However, RBS has admitted that some of its customers were incorrectly told that the taxpayer guarantee was for their benefit, rather than for the bank.

In certain cases, only when an EFG customer defaulted did the business owner discover that they remained liable for the entire outstanding loan.

Today the lender will begin to contact as many as 1,800 business customers who took an EFG loan and have either defaulted or found themselves in a “stressed” financial position. Vince Cable, the business secretary, met senior RBS executives yesterday to discuss the situation. He said that he was “extremely disappointed” that the part-taxpayer-owned bank had “misused” the scheme.

RBS is the biggest user of the EFG, utilising it to support more than £900 million of lending to about 9,000 small businesses. An initial “sample review” of about a hundred RBS EFG loans led by Alison Rose, the head of commercial and private banking at RBS, revealed instances of mis-selling.

Ms Rose, who took up the role in April last year, expressed anger that “our relationship managers were not clear enough on explaining the liability issue, which is critical to customers”.

Affected customers will be put “back in the position they thought they were in going into the scheme”, she added.

“It’s just not good enough,” she said. “I have made significant changes to how the scheme operates and I am looking to do . . . a remediation. I am making fixing it a priority. We will apologise and put it right.”

Any taxpayer money claimed inappropriately as a result of the mis-selling would be returned, the bank said.

Dr Cable said: “I have asked that RBS puts the situation right as quickly as possible, so that neither RBS customers nor taxpayers are adversely impacted.”

Chuka Umunna, the shadow business secretary, said: “It is hugely concerning that we seem to be looking at yet another instance of firms being mis-sold products by banks, and in this case taxpayers’ money is also at stake.”

The Financial Conduct Authority has been made aware of the issue and said that it would remain in dialogue with RBS during its review.

The bank believes that its financial liabilities to customers over the issue will be relatively small because it typically failed to recover more than 25 per cent of the value of most EFG loans in default from businesses, the amount customers were wrongly told their liabilities were limited to.

The EFG will remain available to RBS customers during the review, for which no formal timeline has been set.

When The Times investigated allegations of Enterprise Finance Guarantee mis-selling last August, one of the most eye-catching cases was that of Clive May, above, the owner of a bricklaying business (James Hardy writes).

He has been a vocal critic of Royal Bank of Scotland since NatWest suggested replacing much of his £245,000 overdraft with an EFG, sold on the basis that he would be liable for only 25 per cent of the debt if his company failed.

In fact, the taxpayer-backed guarantee is for the lender, not the customer, who remains liable for the entire debt. However, correspondence sent to Mr May in September 2011 read: “Your liability to the bank would be 25 per cent of the EFG loan balance.”

Mr May was released from his EFG liability after his vociferous public complaints, but he is seeking compensation.

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RBS to review its running of Enterprise Finance Guarantee scheme

 Following discussions with the British Business Bank (BBB) – the body established by Government that manages the scheme – the bank decided it was appropriate to examine a sample of EFG customer files. This exercise identified a number of instances where we have not properly explained to customers how borrower and guarantor liabilities work under the EFG scheme. We will now be implementing a thorough and proactive review of affected and potentially affected customers to ensure they are put back in the position they believed they would have been in.

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RBS Deputy Chief Executive Officer Chris Sullivan Leaves Bank

Royal Bank of Scotland Group Plc’s Chris Sullivan, the deputy chief executive officer whose evidence to Parliament was criticized by legislators, has left the bank.

Sullivan, 57, departed Britain’s largest taxpayer-owned lender on Dec. 31, a spokeswoman for the Edinburgh-based bank said by telephone today. RBS said in February he would retire in 2015 after helping to oversee the restructuring of the bank. Sullivan couldn’t be reached for comment through the bank.

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Bank of Scotland accused of fraud by Attorney General John Larkin QC

John Campbell John Larkin QC

Attorney General John Larkin QC said there was evidence of “criminal fraud under the 2006 Act” and that the matter has now been drawn to the attention of the police

Northern Ireland’s Attorney General has accused Bank of Scotland of “criminal fraud”.

John Larkin QC made the comments in relation to the bank’s treatment of some customers who fell behind on their mortgages.

An earlier court hearing ruled the bank unfairly double-billed some customers whose mortgages were in arrears.

Bank of Scotland rejected Mr Larkin’s claims, saying it strongly takes issue with the allegations.

The bank had appealed the verdict of the earlier court hearing but dropped that appeal on Monday morning.

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Private prosecutions should be easier and more accessible

The procedure for bringing a private prosecution in Scotland should be made easier and more accessible, according to litigation specialist Cameron Fyfe.

A unique business venture has been formed by a solicitor in partnership with two barristers who have begun trading as a firm dedicated to bringing private prosecutions in England.

Fyfe believes there is a market sufficiently strong to enable such a venture to operate in Scotland, and says that he is approached “continually” by clients wishing to raise private actions. Only two such cases have ever proceeded in modern times.

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Royal Bank of Scotland Group plc Shows Once Again That It Can’t Be Trusted

By – Tuesday, 25 November, 2014

Whenever you make an investment, you are placing a huge amount of trust in the company’s management. So it’s key that management, and the company as a whole, demonstrate that they can be trusted without misleading investors. Royal Bank of Scotland (LSE: RBS) (NYSE: RBS.US) has a history of misleading investors but up until last week, many analysts and investors alike had started to believe that the company was changing for the better.

Unfortunately, RBS showed once again last week that it can’t be trusted after the bank revealed that it had made a major error in its reported capital strength in the recent European stress tests.

Major error 

RBS announced at the end of last week that it had incorrectly calculated its core tier one ratio, under the simulated European Banking Authority’s three-year period of stress. The original figures suggested that the bank’s tier one ratio would fall to 6.7% by 2016, in an adverse situation.

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RBS apologises for ‘incorrect’ evidence to MPs’ committee

RBS Headquarters

24 November 2014 Last updated at 01:07

Royal Bank of Scotland has apologised for giving incorrect evidence to a parliamentary hearing, it has emerged.

Bank directors appeared before the Treasury Committee in June to answer claims that RBS’s Global Restructuring Group (GRG) had deliberately killed off viable firms.

Newly released letters show that RBS chairman Sir Philip Hampton later said some of the evidence “lacked clarity”.

Committee chairman Andrew Tyrie branded the evidence as “unacceptable”.

GRG handled RBS’s loans to companies considered to be a possible risk.

But there were allegations that some viable companies were deliberately forced to close by GRG.

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