Allegations about the way Royal Bank of Scotland treats its small businesses have resurfaced after senior executives from the bailed-out bank were accused of being "wilfully obtuse" when giving evidence to MPS.
Andrew Tyrie, the chair of the Treasury select committee, issued a damning verdict on the evidence provided last month by two of the most senior directors of the 81% taxpayer-owned bank, which has been scrambling to defend its stance towards small business customers.
Chris Sullivan, deputy chief executive of RBS, was forced to write to Tyrie to clarify evidence given by himself and Derek Sach, who runs the global restructuring group (GRG) at the centre of the controversy, last month.
The GRG has been the focus of a number of allegations, notably from Lawrence Tomlinson, an adviser to the business secretary, Vince Cable, that it forces viable small businesses to the brink so that the bank can buy up their properties to then make a profit.
When the two executives gave evidence in June they denied that GRG was run as a profit centre, but in his letter, Sullivan admitted that on an accounting basis the operation was run this way.
This prompted an angry reaction from Tyrie, a Conservative MP. "RBS has now offered the committee what it euphemistically describes as 'additional comments'. In fact, they have done a belated U-turn. It's not as if the facts have changed. So it now appears that RBS has been wilfully obtuse with the committee," Tyrie said.
"If this is how RBS deals with a parliamentary committee, how much can customers and regulators rely on it to be straightforward with them?"
The description of the GRG unit as a profit centre was made in a report commissioned by RBS from Sir Andrew Large, a former director governor of the Bank of England, who warned that there could be potential or perceived conflicts of interest because GRG is an internal profit centre which could also demand that troubled small businesses in the lending divisions be transferred to its operations.
Tomlinson also compiled a report last year alleging that GRG was deliberately wrecking viable small businesses to make profits for the bank. Tomlinson, Cable's entrepreneur in residence, argued that small businesses ended up in GRG and then had their properties sold to the bank's property arm, West Register, making a profit for the bank. RBS has since pledged to shut the contentious West Register unit which owns more than 1,300 houses and flats as well as properties such as care homes, pubs and hotels and was set up in the 1990s recession.
In his letter, Sullivan, who is leaving RBS next year, also had to clarify remarks made by himself and Sachs that they had not seen a report commissioned by the bank into the Tomlinson allegations.
Sullivan wrote: "I need to correct the statement I made to the committee that I did not see a draft of the report, as on further checking with my office I can confirm I was in receipt of a copy during this period and made some comments of a typographical nature. Mr Derek Sach was also given sight of a copy of the report."
Sullivan said the bank did not disagree with the description of GRG being a profit centre, which he said was an accounting term.
"What Mr Sach and I were taking issue with is the way others have used Sir Andrew's report to suggest that GRG had a profit motive with a prejudice against our customers, rather than a turnaround motive. Indeed, as Mr Sach pointed out in his evidence, far from making any profit for the bank, GRG has recorded a substantial loss over recent years," Sullivan said.
The GRG division is currently being scrutinised by the City regulator.
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