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Britain's biggest bank chiefs will face a grilling from politicians after an influential panel of lawmakers revealed that it has launched an inquiry into the groups' lending practices to small businesses.
According to a statement by Andrew Tyrie, chairman of the Parliamentary Commission on Banking Standards and Treasury Committee, the UK government will grill all bank chiefs, after a report by Dr Lawrence Tomlinson suggested that the Royal Bank of Scotland pushed businesses into default after moving them into its Global Restructuring Group (GRG).
"SMEs report that they are struggling to secure adequate access to finance, from banks and elsewhere," said Tyrie.
"It is vital to a sustainable economic recovery in the UK that this market be restored to working order."
He added that the inquiry will on "access to finance for firms, scope for opening up the sector to more competition and the treatment of SMEs by banks."
Bank Inquiries Rack Up
Tomlinson, an adviser to Britain's business secretary Vince Cable, claimed that RBS pushed businesses into default after moving them into its GRG.
He added that the 81% government-owned RBS also profited from their struggles as by moving them into GRG, this can create more revenue for the bank through higher fees and margins.
It can also result in the purchase of devalued assets by its property division, West Register.
Tomlinson runs LNT Group, based in the north of England which has annual revenue of £100m (€122m, $167m) and has interests in construction, software, car manufacturing, and care homes.
After the release of Tomlinson's report, RBS drafted in heavyweight lawyers to review the treatment of SMEs and denied wrongdoing.
However, the Financial Conduct Authority (FCA) kicked off its own independent review into RBS's treatment of business customers in financial difficulty by appointing the Promontory Financial Group and Mazars to conduct the report.
It added that the groups will also consider allegations of poor practice set out in the report by Tomlinson and referenced in Sir Andrew Large's report.
"We welcome confirmation of the FCA's review and will support the process in every way we can," said RBS Head of Conduct and Regulatory Affairs Jon Pain in a statement to IBTimes UK.
"The full investigation of these issues is vital in order to protect the trust our customers place in us.
"In addition to the FCA review RBS has commissioned the law firm Clifford Chance to conduct a further independent investigation into these issues.
"Any customer with concerns about their experience with GRG can contact Clifford Chance to have their case examined."