Britain’s banks are once again facing questions from
consumers and regulators as two high-street banks have this month become
embroiled in yet more scandal.
RBS and Co-op bank have both come under fire following
damning allegations against both lenders. The Co-op bank, who have found
themselves in financial difficulty since they failed to take over 630 branches
from Lloyds and a £1.5bn capital shortfall, this month was on the receiving end
of allegations regarding former chairman Rev Paul Flowers who has been released
on bail after being arrested in connection with a “drugs supply investigation”.
The bank has admitted that it is losing customers following the
recent revelations amongst existing scandals. The bank said- “Recent events may
have caused some brand and reputational damage, but it is too early to form a
definitive view as to the extent of such damage”. The ethically branded company
last week faced a vote to decide on the restructuring of the bank, which
resulted in the bank being saved from collapse however it means that 70% of the
Co-op bank will be owned by investment institutions.
Banking giant RBS has also faced criticism following a
damning report by government advisor, Lawrence Tomlinson who has accused RBS of
putting viable businesses into default with the intention of making more
profit. RBS would allegedly pass ‘risky’ loans to the Global Restructuring
Group (GRG) lending division which then generates revenue for the bank through
increased profit margins and the purchase of the devalued assets.
Business Secretary Vince Cable has referred the Tomlinson
report to city regulators, the Prudential Regulation Authority (PRA) and Financial
Conduct Authority (FCA) while Bank of England governor Mark Carney described
the allegations as “deeply troubling and extremely serious”.
The FCA has since announced that they will investigate the
claims made in the Tomlinson report citing “concerns as to whether RBS has
treated customers appropriately, in particular those in financial
difficulties”. The FCA will assign an independent person to review the allegations
and take necessary action if the findings reveal issues.
While the UK economy continues to build momentum, the continuing
stream of banking scandal does little to support consumers working hard to
recover from the lasting effects of the recent recession. To learn that both
RBS and Co-op are facing investigation over alleged wrong doing is another blow
to consumers who over recent years have already suffered as a result of significant
and long lasting banking scandals.
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