RBS still has not dealt with many of the problems of its past

The scandals around the bank may have been well documented, but significant questions remain unanswered, writes Ben Chapman

The new chief executive of RBS, Alison Rose (Inpho/Rex)

RBS may have a new name, but that will do nothing to erase its toxic reputation or its attempts to evade responsibility for past actions.

After running out of money in the financial crash and being bailed out by the government, it has been the bank’s customers that have chiefly borne the cost of mistakes made by RBS executives.

In a bid to shore up its disastrous balance sheet, RBS directed staff to bring in as much cash as possible. This took a number of forms over the years.

One method was selling derivatives to small businesses, protecting them against rising interest rates.

This might have been fine, except for the fact that, from at least 2007, RBS knew, as did every other bank, that interest rates were only going to go down and stay down.

Instead of being protected, small businesses were on the hook to pay the bank huge sums of money.

RBS knew because it booked the profits upfront on these interest rate hedging products (IRHPs) on the day it sold them. It also opened up credit lines to cover the extra risk that it had burdened customers with by selling them an IRHP in the first place. This issue has never been properly addressed.

In short, IRHPs were a terrible deal for customers and a great deal for RBS. They also had an important side effect: in many cases, businesses went bust, meaning more cash for RBS, which then conducted fire sales of its customers’ assets.

Then there was RBS’ infamous Global Restructuring Group (GRG), which was supposed to turn struggling businesses around but in many cases destroyed them.

Big banks and corporations with inconvenient truths such as these often tuck them away in a box euphemistically labelled “legacy issues”, but they are not legacy issues for customers of RBS – they remain very much current.

It has been said that customers were collateral damage in the financial crisis; innocent bystanders caught in the crossfire during the necessarily painful task of rebuilding.

However, many customers feel that they weren’t collateral damage. They believe that they were targeted by the bank, which saw them as a means to an end.

The main points of the demise of RBS and its scandal-plagued recovery are well documented, but important questions remain unanswered.

What has not been probed fully enough is the precise role of the Financial Conduct Authority and the Treasury in this saga.

For example, the regulator and the Treasury (RBS’ biggest shareholder) oversaw a review into the mis-selling of IRHPs by RBS.

Why were the terms of that review narrowed so as to exclude many of the customers who RBS ripped off most heavily, a decision that clearly benefited the Treasury?

Back in 2013, after a pilot review of products suggested that almost all IRHPs were mis-sold, the goalposts were moved so as to cut out thousands of customers, who were now labelled “sophisticated”. In other words: “They should have known what they were doing and so won’t get any compensation”.

Sajid Javid, a junior Treasury minister at the time, has yet to fully explain his role.

Similar “legacy issues” abound with the handling of inquiries into GRG’s conduct.

The new chief executive of RBS, Alison Rose, who has been with the bank for 25 years, announced on Friday a grand, positive plan to create 50,000 new businesses and 500,000 jobs.

That is to be welcomed, but it will come as little comfort to the thousands of business owners who are still looking to RBS for answers – and billions of pounds of compensation.