Following a review by the Financial Conduct Authority (FCA), RBS said the new complaints process would be overseen by retired High Court Judge, Sir William Blackburne and would be a transparent, open process.

It has also pledged an automatic refund of complex fees paid by SMEs that were customers in GRG during the relevant period, between 2008 and 2013, as a way of providing refunds more quickly. ‘Complex fees’ includes management/monitoring fees, ratcheted fees, late management information fees, mezzanine fees, risk fees, exit fees and asset sales fees.

Ross McEwan, CEO of RBS said: ‘We have acknowledged for some time that mistakes were made. Some of our customers went through what was a traumatic and painful experience as a result of the crisis. I am very sorry that we did not provide the level of service and understanding we should have done.

‘Although the FCA review into the historical operation of GRG continues, we believe that now is the right time to deal with the areas where we accept some customers were let down in the past.

‘The culture, structure and way RBS operates today is fundamentally different from the period under review.’

RBS described the period in question as ‘a very challenging time for the bank and its customers’, with an ‘unprecedented increase’ in SMEs falling into financial distress in 2008, resulting in the number moving into GRG increasing by around 400%. RBS lost more than £2bn from lending to SME customers. 

However, RBS said it acknowledged the bank could have managed the transition to GRG better and should have better explained to customers any changes to the prices or complex fees it was charging. The bank accepts that it did not always communicate as well or as clearly as it should have done. The bank also did not always handle customer complaints well.

RBS notes that the FCA’s update confirms that no evidence was found that the bank artificially engineered a position to cause or facilitate the transfer of a customer to GRG or identified customers for transfer for inappropriate reasons and that all SME customers transferred to GRG were exhibiting clear signs of financial difficulty.

The update makes clear that there were no cases where the purchase of a property by West Register (the property arm of RBS) alone gave rise to a financial loss to the customer and that there was no evidence of intent for West Register to purchase assets being formed prior to the transfer to GRG. It also states that, in a significant majority of cases, it was likely that RBS’s actions did not result in material financial distress to these customers.

RBS said it continues to cooperate fully with the FCA and remains keen to understand, and learn lessons from, any conclusions that the FCA draws in its review.  The bank said it would not be appropriate to comment further on that review until those conclusions have been published.

In a statement the FCA said: ‘While the FCA still needs to see further detail about how the scheme will operate, we believe that it is an important step for RBS to put in place an appropriate complaints review process which should provide certain SME customers with a route to make a formal complaint, should they wish to do so.

‘Additionally, RBS has agreed to provide automatic refunds for complex fees to some SME customers. In particular, the FCA notes and welcomes the involvement of an independent third party to provide oversight of the complaints review process. The independent third party will provide reports to the FCA on a regular basis.’

Commenting on RBS' announcement of a compensation scheme, Andrew Tyrie, chairman of the Treasury select committee, said: ‘For over three years, the committee has been pressing for fair treatment, for the many businesses who have been at the wrong end of GRG's bad practices. Redress now looks a little closer.

‘It is also a step forward that, in the light of the FCA's mishandling of the IRHP redress scheme, and as the committee has previously suggested, the arrangements for compensations will be handled independently, by a recently retired high court judge.’

In January 2014, the FCA appointed Promontory to review RBS’s treatment of SME customers transferred to GRG between 2008 and 2013. Promontory, with the assistance of its sub-contractor Mazars, provided its final report to the FCA in September 2016.

As part of their work, Promontory examined 207 cases and covered a six-year period. RBS provided Promontory during the course of the review with 323 gigabytes of data (approximately 1.5m physical pages and 270,000 emails).

The review concluded the inappropriate treatment of SME customers by RBS was widespread, and found that the bank’s communication was poor and in some cases misleading.

It said the bank failed to support SME businesses in a manner consistent with good turnaround practice and placed an undue focus on pricing increases and debt reduction without due consideration to the longer term viability of customers. It also failed to ensure valuations were appropriate and robust, and did not manage the conflicts of interest inherent in the West Register model and operation.

The report estimates in total over a third of the customers transferred to GRG during the relevant period could be expected to face insolvency or administration regardless of RBS’s actions.

Of the potentially viable SME customers transferred to GRG, it concluded that most of them experienced some form of inappropriate action by RBS. However, the report also concluded that, in a significant majority of cases, it was likely that inappropriate actions did not result in material financial distress to these customers.

Gavin Cunningham, forensics partner at Menzies LLP, said: 'If past history is anything to go by, this complaints process could take many years to navigate and still leave businesses frustrated. While offering automatic refunds for the excessive fees incurred by businesses whilst in GRG, businesses could still be left significantly short-changed if they are refused further compensation for any losses they suffered as a result. It is likely that many SMEs will need professional assistance to secure a fair outcome.

'There is no longer any room for complacency when seeking finance and SMEs should always consider their options carefully. Bank finance should not be made unduly complex and customer care and attention is needed in reading the terms and conditions before taking out new loans or signing rollover agreements.'

The FCA is currently assessing what further work may be needed given the findings in the report and has said it will provide a further update on this matter when it is in a position to do so.