A SCOTS business group fighting banking misconduct has expressed shock that nobody has been called to account over complaints about how Royal Bank of Scotland has treated small business customers.

The City regulator has confirmed that the part taxpayer-owned Edinburgh-based bank and its senior managers will not face disciplinary action over the treatment of small firms in its disgraced global restructuring group.

The Financial Conduct Authority (FCA) said it had concluded that its powers to discipline anyone for misconduct do not apply and added that action against senior management in the global restructuring group (GRG) for lack of fitness and propriety "would not have reasonable prospects of success".

The Herald:

It comes just three days after the Crown Office said there was no basis for criminal action over complaints about the defunct GRG which repeatedly faced claims that it deliberately forced small businesses to the brink of collapse so it could profit from their demise by selling off their properties. RBS has always denied the claims.

The FCA said it had taken independent, external legal advice on its decisions, which found that GRG's activities were not within its remit and confirmed "the FCA's conclusions are correct and reasonable".

FCA chief executive Andrew Bailey said: "It is important to recognise that the business of GRG was largely unregulated and the FCA's powers to take action in such circumstances, even where the mistreatment of customers has been identified and accepted, are very limited.

"Taking action was therefore always going to be difficult and challenging."

The Herald:

But Nigel Henderson, the head of SME (small-to-medium enterprises) Alliance Scotland, which supports companies battling against fraud, corruption and misconduct in the financial sector was disgusted by the decisions - saying that bankers appeared to have got away with it again.

The bank’s former chief executive, Sir Fred Goodwin, who would subsequently become a poster-boy for the 2008 financial crisis and RBS's implosion resulting in a taxpayer bail out, apologised for his part in the disaster, was stripped of his knighthood, but was never prosecuted.

In 2016 after the £45bn taxpayer bailout prosecutors concluded there was insufficient evidence of criminal behaviour to bring charges against the bank or any of its directors.

Mr Henderson, who has been fighting the bank claiming RBS pushed his hotel business into bankruptcy said of the decisions: "The FCA are determined come hell or high water to ensure that the protection of the banks is of utmost importance and customers can go hang.

"If countries like Iceland can prosecute bankers and put them to jail for the destruction they caused to the Icelandic economy, I find it inconceivable that Scotland and the wider UK do not have the legal expertise to do exactly the same.

"For the FCA to say business banking is not a regulated product should not absolve them from making sure that the banking system works for everyone's benefit. The wider economy has been ruined as a consequence of what RBS and other banks have been doing."

The Herald:

A much-anticipated independent report into GRG by Promontory Financial Group was finally published earlier this year, showing that there was "widespread inappropriate treatment of customers" inside the unit.

However, it said there was no evidence that "defaults were engineered to transfer businesses to GRG simply to generate revenue for RBS through fees".

The FCA also said it found no evidence of dishonesty or lack of integrity.

But Mr Bailey said: "The fact that we can't take action in no way condones the behaviour of RBS.

"We expect high standards from the firms we regulate and RBS fell well short in its treatment of GRG customers.

"We feel strongly that those companies that have suffered loss as a result of how they were treated whilst in GRG must be appropriately compensated."

It is now "closely monitoring" the complaints process being led by retired High Court Judge Sir William Blackburne.

While commercial lending to SMEs is still not regulated by the FCA, the watchdog stressed it introduced a senior managers regime in 2016 allowing it to hold managers of banks to account for the way they treat small firms.

RBS set aside £400m to compensate thousands of small businesses that say they were mistreated by GRG.

From the 16,000 firms eligible, RBS said it had received 1,230 complaints as well as a further 165 from customers outside of the scheme’s scope.

GRG handled some 12,000 troubled small firms between 2007 and 2012 alone.

The Herald:

The Treasury Select Committee said it was "disappointing and bewildering" for those affected by the scandal and called for greater regulation of SME lending.

Nicky Morgan, chair of the committee, said: "This demonstrates the need for a change in how lending for SMEs is regulated."

Sir Howard Davies (above), chairman of RBS, welcomed the FCA's conclusion that it will take no further action.

He said: "We await the publication of the FCA's full account and will reflect carefully on its findings to learn any further lessons from what was a hugely challenging time for the bank, its customers and the wider economy.

"The board continues to focus on putting things right for customers through our complaints process and ensuring that past mistakes cannot be repeated."

RBS has so far offered a total of £125 million to victims of GRG - the now defunct turnaround unit that has been accused of pushing firms towards failure in the hope of picking up assets on the cheap.