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Bank governor asked to explain link to scheme in RBS scandal

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August Graham, PA City Reporter
·3-min read
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Bank of England governor Andrew Bailey is facing questions over his role designing a scheme allegedly linked to a Royal Bank of Scotland unit that mistreated small businesses.

The chair of the All Party Parliamentary Group on Fair Business Banking, Kevin Hollinrake, called for Mr Bailey to explain why he had not disclosed his role in the establishment of the Treasury’s Asset Protection Scheme while working for the Financial Conduct Authority.

RBS’s Global Restructuring Group (GRG) was billed as somewhere that distressed companies would be helped back on their feet.

However, business owners claim that bank managers at the group deliberately pushed potentially viable businesses into worse positions and moved them into GRG, which would sell or close businesses.

A review by Promontory Financial Group, commissioned by the Financial Conduct Authority (FCA), later said that the bank failed to ensure customers were treated fairly, but did not find that it had artificially engineered transfers of businesses to the restructuring unit.

Mr Bailey was in charge of the FCA when it released the report into the GRG, which Mr Hollinrake called a “complete whitewash”.

Yet he does not appear to have revealed his role in the establishment of the Asset Protection Scheme, which was set up to guarantee RBS’s £280 billion assets during the financial crisis.

It was this scheme that was in 2014 accused of pushing GRG to foreclose on loans.

A Bank of England spokesperson said: “Andrew Bailey had no role in the creation and scoping of the GRG Review which was then undertaken by Promontory.

“These decisions were taken prior to Andrew becoming chief executive of the FCA. He was not a decision maker in respect of any decision by the FCA on whether or not to undertake an enforcement action.”

In 2014 Derek Sach, the former head of GRG, told MPs that while it would never be in the long-term interest for RBS to destroy their customers, it would strengthen the balance sheet short-term.

“The Asset Protection Agency came into being in 2010 and they were always pushing us to go for more foreclosure for exactly that reason, which is something I robustly resisted throughout the period,” he said.

“There is quite a bit of correspondence between me and them of threats and counter threats and not being prepared to do that.”

In 2009 then Bank governor Mervyn King said that Mr Bailey had a role in designing that the Asset Protection Scheme.

“The person who has been working most closely with the Treasury on the design of this is Mr Bailey,” Lord King told MPs at the time.

There is no suggestion he pushed for businesses to be foreclosed on, but questions have been raised over his transparency.

Mr Bailey is alleged to not have revealed his role as he headed the Financial Conduct Authority between 2016 and 2020.

A Freedom of Information request seen by the Mail on Sunday shows that the authority “did not hold records of the FCA board being informed during the period that Andrew Bailey was CEO”.

Mr Hollinrake told the paper: “It is disgraceful. I can hardly believe it. I did not know (Bailey) was involved in the design of the Asset Protection Agency because no one did.

“In public life you are meant to declare your interests because the FCA was leading this investigation into GRG and it was a complete whitewash.

“We need a proper investigation and he needs to answer in public why he did not disclose this.”