RBS scandal papers ‘were destroyed early’

The Financial Conduct Authority permitted the destruction after only 12 months of more than one million documents collated during a banking scandal investigation — despite the fact that the regulator has a policy of retaining documents for 25 years.
The regulator told Promontory, a private sector firm it commissioned to look into the mistreatment of thousands of small businesses by Royal Bank of Scotland, that it needed to keep the documents it had compiled for one year after it had completed its work.
This means that, in theory, Promontory could have deleted the information months before the resulting report on the scandal was made public by MPs on the Treasury committee.
The Times has also established that the authority says it does not know exactly when the documents were destroyed. IBM, the owner of Promontory, declined to say.
A complaint has been made to the Information Commissioner’s Office, the data regulator, about the destruction of the data.
Kevin Hollinrake, the Conservative MP and shadow business minister, and a former member of the committee, accused the FCA of “a dereliction of duty”.
It is the latest contentious episode for the regulator after its chairman, Ashley Alder, last week rejected calls for him to quit after revealing identities of complainants without their consent in breach of the FCA’s whistleblowing policy.
In 2014 the FCA commissioned Promontory to conduct a regulatory investigation into claims that RBS, now NatWest, had harmed companies in its Global Restructuring Group (GRG) arm. The review found evidence that businesses were “systematically” mistreated. Victims claim their livelihoods were damaged or destroyed. RBS apologised and a redress scheme was established.
It has emerged that the regulator agreed a “retention period” for the underlying data of one year from the date of the final report being delivered to them by Promontory in September 2016. The authority keeps most of its own documents for 25 years.
The FCA believed the one-year provision balanced the need to keep the documents in case of follow-up queries, with the requirement not to keep sensitive data longer than necessary.
Following a leak, the Treasury committee forced publication of the GRG report in early 2018, five months after the expiration of the retention period.
IBM’s refusal to say when the documents were destroyed means that it is unclear whether the documents were deleted shortly before or after the report was published. One source indicated it was afterwards.
Promontory worked under the regulator’s “skilled person” rules. Skilled person reports are not usually made public and the regulator resisted publication of the GRG report, although Promontory was asked to draft it in such a way that the contents could be published.
The FCA emphasised that original copies of bank documents examined by Promontory are still held by NatWest — but not in a structured format or compiled for relevance to the scandal as the Promontory paperwork was.Promontory also compiled tens of thousands of pages of review notes on 207 cases. These would not be in the bank’s possession. Records of Promontory’s interviews with customers and third parties are also not held by the bank.
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The FCA indicated it had kept an extensive range of documents. It said: “RBS’s original customer records should be retained by them. We still retain case summaries produced by the third party who carried out the review. These contain a detailed summary of events and extracts from relevant documents.”
Hollinrake said that the regulator had decided not to proceed with a mooted “stage two” of the Promontory report, which was to explore issues such as the influence of “external stakeholders” including the government on the bank’s mistreatment of customers, and the involvement or otherwise of senior management.
The decision not to commission the second phase was taken before October 2017. This was before or, at most, weeks after, the retention period expired.
Hollinrake said: “If there had been a public inquiry here, as there was in Australia, they wouldn’t have access to the documents as compiled by Promontory.”
In 2019 when asked about the influence of a government agency on GRG, then FCA boss Andrew Bailey told MPs it would not be appropriate for the FCA to investigate another public body — a “public inquiry” if that was wanted, he said.
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Andy Agathangelou, founder of Transparency Task Force, a consumer group, said: “There are very good reasons why organisations and statutory bodies are compelled to keep records — for 25 years in the FCA’s case. This is so there can be no misunderstanding of what evidence was provided, by whom and when.”
Agathangelou said it should be a “high priority” to establish why the FCA chose to require Promontory to keep the records “a mere 12 months”. “To say that is astonishing would be an understatement.”
Regulatory rules mean the FCA would typically be unable to provide such documents to the public, including those affected by the issues, in the absence of a court order.
IBM said: “We are confident that Promontory’s handling of documents in this matter complied with applicable requirements.”
Promontory’s rapid destruction of the GRG investigation documents emerged after questions by The Times and Chris Richardson, a GRG victim.
Richardson and a business partner, Innes “Ernie” Berntsen, were developers of the Coniston Hotel in Sittingbourne, Kent. RBS lent money to the partners, who ran out of cash days before the hotel was scheduled to open. West Register, the bank’s own property arm, bought the hotel out of administration in 2010.
Richardson has claimed he was forced into insolvency so the bank could buy his hotel — an allegation vehemently denied by the bank and rejected by the courts.
The Coniston was one of 207 case reviews conducted by Promontory. In 2018 Richardson discovered that investigators had concluded that what happened to him and Berntsen was an “extreme” example of the “risk of West Register helping to shape GRG’s approach to . . . individual cases
This was a reference to the inherent conflict of interest in having a property development unit linked with a lender that secured debt against customers’ assets. West Register had a “major influence” on the hotel’s collapse into administration, Promontory concluded.
Richardson claims this conclusion calls into question his earlier defeats in court. He, along with the Coniston’s liquidator, want to see the underlying documents that informed Promontory’s findings.
In June 2018 Andrew Bailey, then chief executive of the FCA, told Richardson that the files in question were among those “retained by Promontory rather than the FCA”.
Following a freedom of information request, this year the FCA said it did not hold the documents Richardson was seeking.
When he turned to Promontory, he found that the UK entity which conducted the GRG review was in liquidation following the transfer of its assets to IBM, owner of the group since 2016. Insolvency practitioners told him that he or his company’s liquidator would need a court order to obtain the documents.
However, when The Times asked Interpath, Promontory’s liquidators, the firm said the documents had been passed to IBM. Interpath subsequently told Richardson: “The records relating to Promontory’s business have been destroyed in accordance with IBM’s retention policy.”
The City regulator said it had agreed a “retention period” with Promontory of one year from its final report, meaning the data could have been destroyed at any point from November 2017. The actual date of deletion has not been established.
Richardson, who has complained to the data regulator about the FCA’s handling of the issue, said: “I’m shocked. There were lots of calls for a public inquiry into GRG and similar scandals after the report emerged in 2018. If an inquiry had gone ahead, the people leading it wouldn’t have been able to access the documents as compiled by Promontory because the FCA allowed them to be destroyed after one year — in contradiction with their own [the FCA] retention policy.”
He added that he regards the FCA’s argument that RBS holds many of the underlying documents as “misleading”. “If you wanted back what has been destroyed by IBM, at best it would take years to compile and at worst it would be impossible. I want the ICO and others to look into it so this recklessness never happens again.”
NatWest has said that Richardson’s allegations of wrongdoing in his case had been “dismissed by various courts” and “have been found to have absolutely no basis at every stage”.
Natwest said that Promontory found no cases “where the purchase of a property by West Register (as opposed to by another person) alone gave rise to a financial loss to the customer” or of purchasing properties at a price “clearly below” market value.
In another twist in the case, following inquiries from The Times about the wider destruction of data, the FCA said it had found the documents Richardson was looking for. However, Richardson will not be given them because the FCA says that would breach rules on regulatory confidentiality.
The FCA said: “We were unable to locate this document after an extensive keyword search of our electronic records in response to the FoI request. We have since discovered the document following a manual search and have written to the requester to apologise.”