Toothless regulators and unrepentant 'too-big-to-fail' banks

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"too-big-to-fail" banksIt has to be said that since the 2007/8 Financial Crisis from which several of the “too-big-to-fail” banks had to be rescued by the central banks, SMEs have struggled to obtain loans and funding facilities from them.
There appears also to have been little in the way of retribution for those that caused the banks to collapse, although banks have since been forced to increase their capital reserves in an attempt by the regulators to avoid having to bail them out in the future.
Take RBS (Royal Bank of Scotland), which had to be bailed out and taken into public ownership, where it still partly remains.
There has been the emerging scandal concerning its treatment of SME customers who were transferred to its restructuring arm, GRG (Global Restructuring Group), with approximately 16,000 ending up insolvent and having to close down. No bail out for them!
After intensive lobbying starting in 2013 this situation eventually became the subject of a lengthy inquiry by the FCA (Financial Conduct Authority), which earlier this year published a summary of its findings, and “recommended” that the turnaround units in all banks be reviewed, and also the relationship between banks and insolvency practitioners, who generally act as their advisers when dealing with clients in difficulties.
The FCA only published its full report in February 2018 following pressure from the Treasury Select Committee. And then in July it announced it not taking any action against RBS or its senior managers over GRG’s behaviour “because its powers were very limited” and “there were no reasonable prospects of success”.
It also announced in early September that banks will face no further action over the interest rate swap mis-selling that contributed to the collapse of many SMEs and the financial difficulties experienced by many clients who had been duped by their banks.
More recently, despite assurances to the Treasury Select Committee given by RBS CEO Ross McEwan that he was not aware of any allegations of criminal activity, in late July it was announced in the Times that a former GRG banker was being investigated by Police Scotland over allegations that RBS had demanded “tens of thousands in cash” from SME owners in exchange for forbearance on their debts.
SMEs have also been advised to get on with any claims they wish to make against GRG before a deadline of 22 October 2018. According to business news website Bdaily, so far £10 million has been paid out in compensation out of a £400 million fund and there have been 1,230 complaints from a potential 16,000 SMEs.
It is little wonder that the CMA (Competition and Markets Authority) has found in a survey of business customers that RBS was rated Britain’s worst bank overall.
Yet despite all this, ahead of a briefing to challenger banks this week on a contest for £833 million of funding, provided by RBS to boost banking competition, Ross McEwan has been quoted as saying the challengers will struggle to compete against the Big Six in the face of their recovery from the consequences of 2007/8.
But this is not all about RBS.  Yesterday’s Financial Times reported on the behaviour of Lloyds Banking Group:  “Not only did the bank seek to obstruct Thames Valley Police’s inquiries into the £1 billion HBOS reading fraud, it also prevented access to the key “whistleblower” Sally Masteron, author of the critical Project Lord Turnbull report, and then fired her because of the inconvenience of her report’s message.”
It seems clear that unless regulators like the FCA are given much more robust powers to take action against the banks, not only RBS, but all ‘too-big-to-fail’ big banks will continue to feel they can act with impunity.
How much longer before they precipitate another, albeit different, calamitous financial crisis?