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FCA rejects call to publish RBS report in full

By Huw Jones
FILE PHOTO - The logo of RBS (Royal Bank of Scotland) bank is seen reflected in the windows of a branch of the bank in the City of London financial district in London September 4, 2017. REUTERS/Toby Melville

By Huw Jones

LONDON (Reuters) - Britain's markets watchdog has rejected calls to publish a report into allegations Royal Bank of Scotland bankrupted small companies to pick up their assets on the cheap, saying it would instead release a detailed summary soon.

The Financial Conduct Authority's (FCA) refusal to publish the report sets it up for a public clash with parliament's Treasury Select Committee (TSC) next month, which had wanted the report published because it has already been leaked to the BBC.

The refusal was criticised by firms seeking compensation from RBS.

The FCA commissioned consultants Promontory in January 2014 to look into allegations that RBS's Global Restructuring Group (GRG) pushed some of its small business customers into bankruptcy in the aftermath of the financial crisis that began a decade ago.

FCA Chief Executive Andrew Bailey said in a letter made public by the TSC on Friday that it was not in the public interest to publish in full because such "Section 166" reports were conducted on the basis they would be kept private.

Bailey said the FCA would publish a detailed summary and in a form that won't need "Maxwellisation", a legal requirement to give RBS and Promontory a chance to respond, a process that has taken years with some official reports in the past.

The detailed summary is largely ready for publication once the FCA has decided whether it should formally investigate RBS or individuals, Bailey said.

"I believe that we are near to reaching a conclusion on whether a formal investigation is called for, having undertaken work to build on the S166 report, Bailey said.

The FCA published a "high-level" summary last year, and permission from RBS and Promontory would be needed before publishing the detailed summary.

The BBC reported in August that only 10 percent of firms placed in the recovery group returned intact to the main RBS bank.

UNCONSCIONABLE

New TSC Chair Nicky Morgan said on Friday in response to Bailey's letter that the leak of a report the watchdog has had for almost a year has fuelled confusion over what really happened to GRG customers.

The committee recognised that such reports were normally not intended for publication, but given it was now in the hands of several third parties, publication was overwhelmingly in the public interest, she said.

"Following my letter to Mr Bailey earlier this month, Committee colleagues and I have been overwhelmed by messages from those who consider that their businesses and livelihoods were destroyed by RBS' GRG. Those affected have a right to know what really happened," Morgan added.

"The Committee is due to see the FCA next month, and I have no doubt that these issues will be raised."

The RBS-GRG Business Action Group, which represents hundreds of GRG customers seeking compensation, said the refusal to publish is "shocking and unconscionable", and that Bailey should step aside.

The all-party parliamentary group on fair business banking and finance said it was "outrageous" the FCA has refused to publish the report, saying it "smacks of a cover up" and called on the watchdog to reconsider its position.

The group's vice chair Norman Lamb said he would ask Chancellor of the Exchequer Philip Hammond to intervene.

The Federation of Small Businesses said companies who had their livelihoods taken away deserve the truth, an apology, and the evidence they need to secure compensation.

State-backed RBS, which had no comment, has admitted some wrongdoing over its handling of small businesses, but has said there was no evidence it pushed companies into bankruptcy. Promontory referred all questions to the FCA.

The FCA is investigating the leak of the report and has told RBS and Promontory to do likewise.

(Additional reporting by Andrew MacAskill; editing by Mark Potter and Jason Neely)