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MPs demand public inquiry into banking sector following RBS GRG scandal

MPs have demanded a public inquiry into abuses by Britain's biggest banks following a decision by the financial regulator not to take further action against RBS over the actions of its controversial restructuring unit.

In a letter the Financial Conduct Authority's (FCA) Andrew Bailey, the MP Kevin Hollinrake, who co-chairs the all-party parliamentary group on fair business banking, said he was "extremely concerned" by the FCA's lack of action against RBS, which was found to have mistreated thousands of customers whose businesses were taken into its restructuring division for firms in financial distress.

A review commissioned by the FCA in 2014 and partially released in February found there was "widespread inappropriate treatment of customers by GRG".

However, last month the FCA said no action would be taken against RBS and its senior managers over GRG because it found no evidence of a lack of integrity or dishonesty. It also admitted its powers as a regulator were "very limited" and there were no "reasonable prospects of success".​

Read more: Calls to give City watchdog sharper teeth after lack of action on RBS GRG

Hollinrake insisted the FCA publish its "fuller account" to examine the root causes of the scandal and whether the actions of the GRG were sanctioned by senior management.

The MP accused RBS of operating a policy of “unnatural selection” regarding its legal challenges, allowing unwinnable cases to go to court while imposing "gagging orders” to "prevent those who were lucky enough to at least get something back from speaking out".

RBS disputes this, saying some of the most high-profile test cases against it went to court, including that between Bowlplex and the bank that was recently thrown out of court. So far it has paid out £6.7m in compensation.

The APPG said its inquiry should cover rival banks, citing Dunbar Bank, Clydesdale and Yorkshire, Lloyds and HBOS as others that "regularly feature in complaints".

RBS declined to comment. The FCA was contacted for comment.

Read more: LGIM reported to FCA over 'compliance and risk failings' by whistleblower

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