Now City watchdog is embroiled in RBS small firms scandal

THE Financial Conduct Authority has been plunged into the centre of the scandal of Royal Bank of Scotland’s treatment of small firms.

The Mail on Sunday can reveal that an employee of the City watchdog set up the Government agency that oversaw parts of RBS’s controversial Global Restructuring Group, after the bank was bailed out in 2008 using taxpayers’ money.

The agency’s primary focus was to safeguard the Government’s assets at a time when the group’s bankers stand accused of mistreating thousands of customers, many of whom saw their livelihoods ruined.

One of the group’s alleged victims – property developer Oliver Morley – presented evidence to the High Court last week suggesting that an arm of the Treasury, the Asset Protection Agency, had ‘dayto-day’ involvement and ‘strategic’ control over the group and the way it treated some customers.

The Mail on Sunday can now reveal that the agency was set up by Jeremy Bennett, a senior adviser at the Financial Services Authority, the predecessor to the FCA, who was seconded to the Treasury.

The agency was created to insure RBS’s riskiest loans after the bank was bailed out by the Government during the financial crisis.

Bennett was interim chief executive of the agency for a short spell in 2009 and the agency’s 2009-10 business plan described how he had ‘played a major role in designing’ its so-called asset protection scheme ahead of launch.

Other documents outline how the agency expected RBS to treat its customers in a manner ‘consistent with good industry practice’.

But this requirement was ‘subor- dinate’ to the agency’s ‘ primary overarching requirement’ – its socalled asset management objective. This was to minimise losses for the bank on loans, while maximising asset values and the amount that could be recovered from them.

There is no suggestion of wrongdoing on the part of Bennett, but the revelation will lead to awkward questions for the FCA, which is due to publish a full report on the scandal shortly. Campaigners and politicians say the revelation about Bennett compromises the FCA’s position leading the investigation.

Former Business Secretary Sir Vince Cable said he no longer had ‘any confidence in the FCA’.

Kevin Hollinrake, co-chairman of the all party parliamentary group on Fair Business Banking, also raised concerns. He said: ‘The public must have confidence in the regulator, which must be seen to be willing and able to establish who did what and hold those responsible to account.’

An FCA spokesman said: ‘Jeremy Bennett never worked for the FCA. He left the FSA in 2009.’