Page 13 - RBS GRG F Teaching Note

Diagram 2 hints at the lack of power residing with regulatory

authorities, such as the FCA, for assessing the conduct of
GRG. Reasons for this are relatively clear:

• commercial lending activity is largely unregulated and,

therefore, most of the judgements made about

inappropriate customer treatment are not based on

regulatory rules or principles,

• commercial lending activity was significantly affected by

the financial crisis particularly in the earlier years of the

review period (2008 to 2011) and SME customers and

commercial lenders had to make very difficult business

decisions as a result,

• commercial lenders such as RBS are likely to have legal
rights through the contractual arrangements with their

customers which they may exercise at their discretion
when dealing with financially distressed customers in

default of, or at risk of defaulting on, credit facilities,

• commercial lenders have no obligation to lend to a

business customer on terms that they find

unacceptable or to continue to lend on terms that are

no longer being met by a business customer in default,

and

• while successful turnaround may sometimes be of

mutual benefit to a commercial lender and a customer,

a return to financial health is not always possible and

businesses will at times fail. In the case of businesses

(4)