RBS under pressure to reveal details of EFG loans mis-selling

on Jan 16, 2015
Updated: Oct 21, 2019
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The Federation of Small Businesses (FSB) has called for close scrutiny of the mis-selling of taxpayer-backed loans by the Royal Bank of Scotland Group Plc (LON:RBS). The statement came after the part-government-owned lender admitted that it had found failings in the way in which it used the Enterprise Finance Guarantee (EFG), a government scheme designed to boost lending to smaller companies.

RBS’ share price has been little changed in morning trading today, having shed 0.72 percent to 360.20p as of 08:02 GMT. The decline is largely in line with a drop in the broader market with the FTSE 100 index currently standing 0.68 percent lower at 6,454.71p.
The FSB yesterday said in a statement that it was ‘deeply disappointed’ at the latest example of a bank mis-selling to businesses.
“What is important now is that we find out the full story behind what happened at RBS and why,” John Allan, national chairman of the federation, commented in the statement. “We need to know who has been affected and make sure they get full and timely compensation. This process must be swift, comprehensive and independently verified.”

Under the EFG scheme, RBS made loans to small businesses which would otherwise have been ineligible for credit, with 75 percent of the loan guaranteed by the government, reducing the FTSE 100 lender’s losses if the firm defaulted. RBS, however, has admitted that this was not properly explained in some instances, leaving businesses under the impression that they were not liable to repay the entire cost in the case of default.

“EFG is a hugely important scheme that has helped many businesses continue to trade today,” Alison Rose, CEO Commercial and Private Banking at RBS, said in a statement. “I am not satisfied that we have met those standards in all cases.”
The lender has said that it will conduct a full ‘loan by loan’ review of its use of the EFG, and that any customers adversely affected by the mis-selling would be compensated.
As of 08:50 GMT, Friday, 16 January, Royal Bank of Scotland Group share price is 362.10p.

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