AN RBS memo suggesting to managers that struggling business customers “hang themselves” when in financial difficulty was not challenged internally, a new report reveals.

The internal memo was said to have laid bare the bank’s predatory practises at the expense of customers.

The 360-page document details “widespread inappropriate treatment” of customers that “should also be considered to be systematic” by the bank’s disgraced Global Restructuring Group - a unit which was meant to help businesses experiencing financial difficulty.

An influential group of MPs has branded the findings of the report into the Royal Bank of Scotland's mistreatment of small businesses "disgraceful" after wielding parliamentary privilege to publish the report which  had been commissioned by the Financial Conduct Authority four years ago, but the City watchdog had refused to publish it.

One in six of the businesses examined at experienced “material financial distress” as a result of GRG’s mistreatment, the report, which was authored by consultancy firm Promontory, found. 

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RBS has been dogged by allegations that its Global Restructuring Group (GRG) intentionally pushed small businesses towards failure in the hope of picking up their assets on the cheap.

The damning report published by the  Treasury Select Committee  makes clear that certain actions - such as the writing and circulating of the infamous "Just Hit Budget" memo were not restricted to a few individuals, as previously argued by the bank. The memo urged staff to let customers "hang themselves" and referred to some clients as "basketcases: time consuming but remunerative".

The report says the memo was "widely circulated" and that the "content and tone were never challenged at a senior level".

It adds that it was "unlikely to be confined to that region". It was "indicative of an unprofessional culture that set little store by the interests of its customers". 

And the authors of the report also indicated they had found at least one incident where a member of GRG had been "so inappropriate" in emails involving a foreign client it had prompted the authors to write directly to RBS.

The report details how GRG's twin objectives - of helping struggling customers return to viability and contributing to the bank's bottom line - were incompatible and led to a culture it called "the GRG way". The restructuring unit was treated as a "profit centre", it notes.

The report also backed the executive summary published last autumn, which revealed that of those that were viable, around 16 per cent "experienced inappropriate action by RBS which appeared likely to have caused material financial distress".

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In total, 92 per cent of potentially viable businesses that went into GRG had "experienced some inappropriate actions".

In a statement, TSC chair Nicky Morgan said: "The findings in the report are disgraceful.

"The overarching priority at all levels of GRG was not the health and strength of customers, but the generation of income for RBS, through made-up fees, high interest rates, and the acquisition of equity and property.

"The committee has not taken the decision to publish lightly.

"Normally, reports prepared under section 166 are confidential, but there is overwhelming public interest in bringing transparency to what happened at GRG, given the earlier leak of the report, and in ensuring that everyone can see, and know that they are seeing, an authentic and verified copy of Promontory's original report."

Nicky Morgan, chair of the Treasury Select Committee, said: "The findings in the report are disgraceful.

"The overarching priority at all levels of GRG was not the health and strength of customers, but the generation of income for RBS, through made-up fees, high interest rates, and the acquisition of equity and property. The committee has not taken the decision to publish lightly.

"Normally, reports prepared under section 166 are confidential, but there is overwhelming public interest in bringing transparency to what happened at GRG, given the earlier leak of the report, and in ensuring that everyone can see, and know that they are seeing, an authentic and verified copy of Promontory's original report.

"We have today published the terms of reference for our inquiry into SME finance. We'll examine what must change to prevent what occurred at GRG from ever happening again, and how to restore confidence among SMEs in banks as a source of finance. I encourage all those with views to submit evidence.

"As well as continuing to monitor the FCA's further investigation into GRG, we'll keep a close eye on RBS's Complaints Process to determine whether it is providing the fair and reasonable compensation that has been promised to mistreated customers. Any person referred to in the report is invited to make any observations to the committee."

A spokesman for RBS said: "We are deeply sorry that customers did not receive the experience they should have done while in GRG. The report makes for very difficult reading and some of the language used by our staff in the past was clearly unacceptable.

"Although the most serious allegation - that we deliberately targeted otherwise viable businesses in order to distress and asset-strip them for the bank's profit - has been shown to be without foundation, we know that the bank got a lot wrong in how it treated some customers in GRG during the financial crisis.

"That is why we put in place two steps - a complaints process overseen by retired High Court Judge, Sir William Blackburne, and an automatic refund of complex fees - to put things right. Any in-scope customer who feels they were treated inappropriately whilst in GRG should make use of the complaints process which the FCA agree is an appropriate response to the findings.

"The culture, structure and way RBS operates today have all changed fundamentally since the period under review and we have made significant changes to deal with the issues of the past, including how we treat customers in financial distress.

"We have accepted all the relevant recommendations from the report and our focus is now on rebuilding trust and supporting our customers."

Incoming Financial Conduct Authority (FCA) chairman Charles Randell told MPs on Tuesday that while the handling of the RBS report was a question for the board under its current chairman, he will prioritise how cases are generally treated.

"It must be my first priority when I arrive at the FCA to conduct my own assessment of, I think, not just the RBS GRG report, but the background to all of the cases where there has been, as I say, this very obvious tension between public expectations and the expectations of (Treasury Select) Committee and what the FCA has felt able to deliver."

Treasury Select Committee chairwoman Nicky Morgan stressed that it was the committee's responsibility to hold the FCA to account.

When asked how he saw that relationship playing out under his chairmanship, Mr Randell said: "First of all, I think it has been a difficult relationship at times but it has obviously been beneficial from the point of view of transparency and accountability.

"And I think the committee currently - and if I may say so under your predecessor - from what I've seen has really upped the game of the way the committee held the regulators to account.

"I think I would like to feel that my role as chair would not be to come here and defend the FCA but to come here and account for what the FCA does, and that may include coming here and saying we can do better.

"So I want to go into it with that mindset.

Mr Randell was also pressed over the delays in FCA action in righting the wrongs felt by consumers and small businesses.

"I understand the frustration that the public feel particularly in these cases where it's manifest that there's significant harm and distress...to individuals and small businesses and they feel that, you know, 'justice delayed is justice denied', so I quite understand that."

He added: "I do want as part of the assessment that I'm proposing to make when I arrive in the role, to ask some questions about why things take as long as they do, and are there things that can be done to significantly change timetables and outcomes.

"Now it may be that there's not a single silver bullet, it may be that there are a series of changes in procedure that could improve matters, but I've got an open mind on that at this stage."

The Treasury Select Committee  said there was "overwhelming public interest" in shifting the Global Restructuring Group (GRG) report into the public domain after it was widely leaked online and through social media.

The move came after Andrew Bailey, head of the Financial Conduct Authority (FCA), was ordered by the TSC earlier this month to publish the document on GRG, the banking giant's much-criticised restructuring arm.