Posted on 04.11.2013, by Rob Warlow
Back in July in this blog we reported that RBS decided to request an independent review of its lending practices with the objective being to enable RBS to enhance its support for SMEs while maintaining safe and sound lending practices. With the review having been carried out the findings reveal that RBS and its subsidiary Nat West has much to do in overhauling its lending processes.
The investigation, headed by former Bank of England Deputy Governor Andrew Large concluded that RBS has not supported the SME sector in a way that meets its own targets or the expectations of its customers. It says that while RBS has started to address a number of the issues raised, further progress is needed.
The report identified a number of reasons for RBS failing to hit its lending targets, including:
RBS’s SME lending targets were at odds with its tougher credit standards, and the limits imposed on lending to certain sectors, for example lending to commercial real estate
Internal restructuring had led to lack of clarity as to which part of the bank was responsible for SME lending
There is a ‘risk adverse’ culture amongst its Managers and Credit Officers
The bank’s lending process is time consuming and loan applications take longer than at other banks
Credit skills of customer-facing staff, although improving, are not up to standard
Having an independent committee pull apart your business and highlighting areas of weakness is a tough message to take but RBS CEO Ross McEwan has accepted the findings and recommendations and has committed to take action. Looking at the findings I suspect that other High Street banks are guilty of many of these sins.
McEwan has committed RBS to the following key actions amongst others:
The bank will write to thousands more SMEs setting out clearly how much it is willing to lend to their business. It has already offered £4 billion of lending opportunities following a similar exercise earlier this year;
A dedicated website will be developed to show clearly what information RBS use to make a lending decision and set out simple, clear steps in its lending process;
The bank will begin work to enable bankers to make all but the most complex lending decisions in just five days of receipt of all necessary information;
RBS will ensure two thirds of its lending decisions are made locally and by sector specialists;
RBS will continue to invest in building the capability of its people with at least 90% of Relationship Managers and Credit Managers professionally qualified;
RBS will start a programme to make all customers whose loan applications are declined aware of the appeals process, and will continue to work with the Independent Appeals Chair to improve the support it provides to customers going though this process; and,
The bank will commit to pointing businesses to alternative sources of finance where it cannot support a loan application.
This is a big undertaking and RBS will on an annual basis publicly report on progress against these commitments. It will be interesting to see how they fare in addressing these issues given the mammoth task ahead of them.
Hi Rob, it was so interesting and entertaining listening to you at the Kevin Green Wealth Coach Workshop in Reading this weekend! I didnt realise you can find Finance proposals such fun!. Brilliant tips! Thanks.
Further to your recent presentation at LEAD Wales just wanted to say it was very refreshing to see somebody talk passionately and positively about finance, very insightful!
Rob delivered a series of 3 workshops aimed at understanding how finance houses look at finance propositions with the aim for us as a team to deliver more of a bespoke offering to our customer base. The training was delivered to a mixture of staff who work with new businesses start-ups and existing established businesses across Mid & South West Wales. Rob delivered the training with an abundance of passion and has really helped my team look at financial propositions in a different light, many thanks again Rob and I look forward to work with you in the near future.
Rob kindly agreed to attend the recent Pontypridd RFC sponsors networking evening and delivered what can only be described as an excellent talk on 5 Tactics to Boost Your Business and Your Profits. He kept the audience engaged throughout and the feedback from everyone was excellent. Rob is very knowledgeable on business and finance and on top of that is a genuine nice guy. We hope to have him back at a future event and I have no hesitation in recommending Rob’s services.
I wanted to thank you for such an insightful, energetic, and entertaining talk at the Kevin Green Wealth event on securing funding and creating a successful plan. It was brilliantly executed and a pleasure to listen to and the ideas I’ve learned are definitely going to help me in going forward.