Royal Bank of Scotland (RBS) has been told that its system for lending to small businesses needs a complete overhaul after a report found major defects in the way it deals with SMEs.
Sir Andrew Large, a former Deputy Governor of the Bank of England, stated that RBS failed to meet its own targets for lending to SMEs. He went on to say that unless it instituted a number of “radical reforms,” it would continue to see its market share drop.
The chairman of RBS, Sir Philip Hampton, commissioned the report, which recommended that the bank simplify its lending process and speed up its decision making for credit applicants. The review was ordered by Sir Philip in light of a number of claims that RBS was not doing all that it could to help small businesses.
According to research conducted by consultants Oliver Wyman for the report, the Bank’s share of the small business lending market dropped from 40 per cent to 27 per cent. The bank is warned that it will continue to drop over the next five years by another 10 per cent unless steps are taken to stop the decline.
One of Sir Andrew’s recommendations was that RBS must determine that it is clear who is in charge of small business lending. Under the current structure, the operation is split between a number of different divisions.
The report was released at the same point that RBS and the Treasury decided to announce the outcome of a review into the break-up of the taxpayer-backed lender into a “good bank” and a “bad bank.” Sir Andrew has cautioned that this move could make things even worse for SMEs trying to get loans from the bank.
The report also called for the Bank to launch an independent investigation into claims of wrongdoing by its global restructuring group (GRB) which deals with businesses in financial difficulty.
Sir Andrew said small businesses had made some serious allegations about the conduct of the unit and that the bank had to conduct a thorough investigation into the matter. He stated that the wrongdoing by GRC needs to be cleared up.
