While 2008 is now, literally, more than a decade ago, the ramifications of the financial crisis continue to linger on, like the proverbial bad smell which just will not go away no matter how much cleaning you do.  Out of all the pieces of dirty laundry which were brought out for a very public washing, possibly there have been none so foul-smelling as the way in which small businesses were treated by both RBSG and HBoS.  Officially, both of these matters have now been closed, unofficially it would appear that they are very far from being dead in the water.

RBSG and the Global Restructuring Group

RBSG’s GRG arm was supposed to help SMEs either shape up or ship out in an orderly manner.  Instead, it became a predatory, asset-stripping entity, driving businesses into foreclosure in order to claim their assets for RBSG and bolster the ailing company’s insipid balance sheet.  Its actions eventually came to light but, to the fury of many, the Financial Conduct Authority has said that it does not have the authority to take action against those responsible.  It says that it gained the necessary authority in 2016, but believes that it cannot apply these powers retrospectively.  While this, if true, is arguably the fault of lawmakers rather than the FCA, the FCA does, however, have to take responsibility for the fact that it initially only published a redacted version of its investigation into the GRG scandal.  It eventually published the full version after coming under pressure from MPs.  While it is not clear why the FCA was so strongly opposed to publishing the full version of its report, it is interesting to note that the report indicates that RBSG may have been acting, at least in part, with the support of the government, or, at the very least, with its tacit approval.  In 2009, the UK government, then under the brief tenure of Prime Minister Gordon Brown, created the Asset Protection Agency, with the official remit of managing bad loans at RBSG, which, at that point, was 70% owned by the taxpayer.  Recently-released documents indicate that the APA acted in a more “hands-on” capacity than was previously believed and that, in at least one case, it directly ordered RBSG to foreclose on a business rather than rescuing it.  The documents were released as part of an ongoing court case so it looks like the GRG scandal still has some way to go and possibly some way to grow.

HBoS and the Reading fraud

Between 2003 and 2007, a group of executives at HBoS’ Reading branch perpetrated a fraud which is believed to have drained around £245M from the bank and from small businesses.  Because the activities of those involved were legally classed as fraud, it became the subject of a (6-year) police investigation at the end of which the key perpetrators received jail sentences.  The FCA then took over to see what further action needed to be taken and the end result has been a fine of £45.5M.  The fine would have been almost £20M but Lloyds agreed to settle.  The FCA also banned the criminals from working in financial services, although this is arguably something of a moot point as it is arguably in the highest degree unlikely that they would have found it easy to find new employment in this area anyway.  Once again, however, the FCA has declared that no further action will be taken against the main bank, nor will any of the senior executives at Lloyds (who bought out HBoS during the financial crisis) be held accountable for the fact that they were unable to stop it from occurring in the first place or to bring it to an end earlier.