While American’s wait to see if WikiLeaks will reveal any juicy information concerning Hilary Clinton’s lost emails, the Royal Bank of Scotland (RBS) is quite possibly in the middle of the biggest small business banking scandal ever.  From government over regulation to a department hell bent on ending organizations to recoup assets, RBS has somehow lowered the bar for billion dollar banking institutions.

To begin I want to post part of the official statement from RBS  

“In the aftermath of the financial crisis, we did not always meet our own high standards, and we let of our SME (small and medium-sized enterprises) customers down. We have already acknowledged that, in some areas, we could, and should, have done better for SME customers.  Specifically, we could have managed the transition to GRG better, and we could have better explained to customers any changes to the prices or fees we were charging. We also did not always handle customer complaints well. As a result, a number of our customers did not receive the level of service they should have done or, importantly, that they would receive now.”

In one of the biggest understatements of the year, RBS is accused of coercing 16,000 small businesses into joining the RBS Global Restructuring Group (GRG) during the Financial Crisis.  Internally this program was known as operation “Dash for Cash”.  According to a BuzzFeed report “the files show how small businesses were forced to join the Global Restructuring unit, a part of the bank intended to help ailing businesses, even if those SMEs had never missed a loan payment.  In addition "the files show that RBS forced businesses to join GRG for questionable reasons, like small business customers showing consideration for leaving RBS or threatening to sue the bank for mistreatment.”  Operation “Dash for Cash” is said to have accounted for over $1 billion in profit for RBS.

What makes the situation worse is that during the crisis, RBS “told lawmakers that GRG was not a profit center.”

But RBS’ actions were not without cause.

After the financial crisis, over regulation hit many banks like RBS in droves.  RBS initially struggled under new post-bailout government requirements.  Regulatory bodies pressured the bank “to reduce its property loan exposure, increase capital reserves and increase overall profits to aid economic recovery. To meet these demands, RBS reportedly launched its effort to offload business loans — a strategy grasped by many major financial institutions in the wake of the financial crisis, with SME loans deemed high-risk and not profitable enough to justify the exposure.”  The result was the hidden GRG program, with government agencies asking few questions about RBS’ new profit source.

The government is currently involved in its own investigation of the bank’s practices, but it is unclear what the possible punishments may be.  Some are estimating the bank may be responsible for a payout of billions, but only time will tell.

“What was uncovered in these documents does not match what they said to us,” said Conservative MP Steve Baker in an interview with The Telegraph.  "we were badly misled.“

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