The Global Restructuring Group (GRG) was Royal Bank of Scotland’s (RBS) former turnaround division for struggling businesses, before it was shut down in 2014 following allegations of mistreatment.
16,000 companies were allegedly pushed into the GRG unit after the onset of the financial and banking crisis of 2008.
Many business banking customers of RBS and NatWest were informed that they were “over-geared” or underperforming, and as such were transferred to the GRG.
In the vast majority of cases, GRG was used to secure as much return for the Bank as possible, regardless of whether the business was performing well or not.
Aggressive restructuring, lack of transparency around fees and debt for equity swaps known as Property Participation Fee Agreements (PPFAs) were just some of the ways businesses were affected by GRG.
GRG report faces leak
As a result of these revelations, the Financial Conduct Authority (FCA) called for an independent review of the treatment of small businesses within GRG. The final version of this report was received by the FCA in October 2016, but it is yet to be officially published.
In August 2017, this very same report was subject to a leak. Disclosed documents revealed that 92% of businesses within GRG experienced ‘inappropriate actions’, with just one out of seven returning intact to the main RBS bank.
After facing pressure from the Treasury Select Committee (TSC) to officially release the full version of the report, the FCA agreed to publish a summary which was released this month.
FCA publish interim summary
The publication supports the claim that RBS prioritised commercial aims by raising money for the Bank, rather than helping businesses regain their financial health.
GRG was marketed as though it would tend ailing businesses, but in reality, it stripped businesses of their assets and led them into even greater debt.
Common signs of GRG mistreatment
There is no prescribed test as to which business and situations would trigger the transfer of a business into GRG. The unit was initially set up to help failing businesses, however, successful and well-run businesses were often put into GRG, as the Bank saw an opportunity to secure as much capital for themselves as possible.
Common indications of mistreatment would include:
- Not knowing why you are suddenly being managed by GRG
- Payment of GRG management fees
- Complex and aggressive restructuring of facilities
- Bank insisting you pay an external accountancy firm to do an Independent Business Review
- Forced sale of assets at a discount
- PPFAs being insisted by the Bank; and
- Any involvement with West Register.
As a result of the GRG scandal, RBS had set aside £400m in total compensation for businesses crippled by GRG.
For more information, view our GRG guide here.
Seneca Banking are strongly urging businesses and their advisors to take specialist advice in relation to GRG. For more information and advice, contact Daniel Fallows on 01204 322 805 or Daniel.firstname.lastname@example.org.
Author is Daniel Fallows, director of Seneca Banking Consultants
Seneca Banking Consultants is a leading UK financial expert offering specialist advice to a wide range of businesses who have been mis-sold complex financial products and mistreated by business support units, such as the Global Restructuring Group (GRG).