Amid widespread anger at the lack of sanctions against RBS’s Global Restructuring Group (GRG), the FCA has claimed that taking action against its managers for their conduct against small and medium-sized enterprises (SMEs) would not have ‘any reasonable prospects of success'.

While not finding any evidence that the GRG deliberately ‘artificially distressed and transferred’ SMEs to profit from their restructuring or insolvency, the FCA investigators say: ‘many aspects of GRG’s culture, governance and practices were deficient and that in some areas the inappropriate treatment of customers was widespread and systematic’.

Responding to numerous allegations against the GRG, The FCA commissioned an independent review to be undertaken by Promontory Financial Group (UK) Limited, together with its sub-contractor Mazars.

’There was a failure on the part of GRG and RBS to fully recognise and manage the conflicts of interest inherent in GRG’s twin commercial and turnaround objectives. There was also a failure to put in place appropriate governance, policies, procedures and processes ... to ensure that a reasonable balance was struck between the interests of the Bank and those of its SME customers,’ conclude the investigators.

They add that the decisions GRG made about its SME customers ‘had the potential to exacerbate these customers’ already difficult circumstances and to have a significant impact on lives and livelihoods. In many cases, the future of SME businesses and the personal financial circumstances of the owner or manager were closely linked.

They say that ‘GRG did not appear to recognise the emotional stress suffered by SME customers in difficult personal circumstances, who were not only losing their business and income but, in some cases where it was held as security by RBS, their family home as well.’

Despite the report’s damning conclusions, the FCA claim their hands are tied as GRG’s activities were unregulated.

‘The steps RBS could take under the law, while seeming unfair to many customers, were governed by the terms of the contract and not regulatory rules. The largely unregulated nature of GRG’s business also means that, in this case, we do not have the power to take disciplinary action, such as imposing financial penalties on RBS or individuals,’ said the FCA is a statement.

‘The lack of regulatory rules against which GRG could be assessed, in the context of the environment at the time and all the circumstances, means that we do not think we could bring a successful case for lack of competence and capability in relation to senior management. Senior management must be held to account where their behaviour falls below the applicable standards; however, to do this requires the standards to exist and to be clear,’ the FCA concludes.

The RBS GRG Business Action Group, which represents hundreds of affected small businesses and is pursuing a legal claim on their behalf, said: ‘We are disappointed but not surprised by today’s announcement. The FCA has always been a supine, toothless regulator, more concerned with protecting RBS than ordinary people. It will not stop us in the pursuit of justice through our high court claim.’

RBS chairman Sir Howard Davies said the bank would await the publication of the FCA's full account and would ‘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’.

RBS has so far offered a total of £125m in compensation to customers of GRG.

Report by Rob Munro