ALEX BRUMMER
THE campaign for justice for the small and medium sized enterprises (SMEs) bullied into submission by the Global Restructuring Group at RBS has come to a shuddering halt.
The Financial Conduct Authority (FCA) and its chief executive Andrew Bailey have essentially washed their hands of the affair, saying no evidence of dishonesty or lack of integrity was found.
Nor was there sufficient reason to believe that senior management set out to cheat customers. The FCA’s finding will disappoint those who hoped to see former RBS chief Stephen Hester, the head of GRG Derek Sachs and restructuring boss Nathan Bostock (now running Santander) the subject of disciplinary action, if not led away in chains.
The problem for the FCA is that it does not actually regulate the dealings of banks with small businesses. Moreover, when the GRG scandal was at its peak and the unit was letting small businesses hang out to dry, the ‘senior managers regime’, which licences bankers, was not in place.
What is disturbing about this episode is how long it has taken to reach the conclusion that the bankers didn’t behave badly.
The first report showing something had gone horribly wrong was produced by the entrepreneur-in-residence at the Department of Business, Lawrence Tomlinson, in 2013. He found striking examples of RBS abusing its relationship with customers.
Neil Mitchell, one of those affected, has campaigned relentlessly for compensation, with RBS putting aside £400m to settle claims from wronged firms.
This sordid affair shows there is a huge gap in regulation when it comes to claims by smaller businesses against the banks.
This has also been exposed at the former HBOS – now Lloyds – Reading branch, where many businesses were victims of an outright fraud.
SMEs are the lifeblood of the economy and the disconnect with their banks is deeply worrying. If the FCA already has too much on its hands protecting consumers, and therefore cannot deal with small enterprises, then the Business Department or Bank of England needs the powers to intervene and discipline banks that breach customer codes.
GRG was one of several hot potatoes inherited by Bailey when he moved from Threadneedle Street to bring order to a distrusted City enforcer. His failure to act will be held against him by GRG campaigners and might be used as a weapon to try to disqualify him as a candidate to be next Bank of England governor. But a failed prosecution might have been even more embarrassing.
Capped ambition
THERESA May’s energy price cap was all about challenging Labour on the issue of fairness. In a highly competitive energy market, in which Centrica lost 341,000 customers in the first half of the year, one can understand why chief executive Iain Conn feels aggrieved. Among his complaints is that the right to refer pricing disputes to the Competition & Markets Authority for independent inquiry is being removed.
Centrica has also been battered in the unregulated US market where it encountered accounting headwinds which corrected in the first half of this year. The primary reason the group’s shares have become serial underperformers, down 40pc in the past year, is the prospect of prices being capped.
One might have thought the nation’s biggest gas supplier would have benefited from the big freeze early this year. In fact it added to costs when engineers struggled to reach homes to keep boilers fired up.
Centrica is being careful not to be the price setter. Current tariffs are below the most expensive suppliers and above the no-frills players. But with wholesale energy prices rising and the deadline for the cap approaching it would not be that surprising if there were a further tariff increase on the way.
In the first half of the year Conn’s blushes were saved by exploration and production, which picked up the slack from the underwhelming performance of the consumer part of the business. Operating profits may be down 4pc but with cash flows of £1.1bn in the first half there is no immediate reason to worry about the dividend.
Income boost
INVESTORS are having a good moment. BP boosted its dividend by 2.5pc as the interim results demonstrating renewed confidence following its big investment in US shale.
The first increase since 2014 should be good for everyone’s pension funds and ISAs.