Royal Bank of Scotland admits it missold a number of loans to small businesses, as it prepares to review 1,800 sales.
After reviewing a sample of loans sold under the Enterprise Finance Guarantee, a Government lending initiative for small businesses, RBS says it has identified a number of instances where the loans were missold.
The bank says it failed to properly explain to customers how the borrower and guarantor liabilities work under the scheme, which provides a 75 per cent Government guarantee to the lender.
RBS says: “We will now be implementing a thorough and proactive review of affected and potentially affected customers to ensure they are put back in the position they believed they would have been in.”
The bank is the biggest lender under the scheme and has lent £900m to 9,000 businesses.
It is understood that 1,800 customers will be involved in the review, and potential redress costs are not yet known.
RBS says it remains committed to the EFG scheme.
RBS chief executive of commercial and private banking Alison Rose says: “EFG is a hugely important scheme that has helped many businesses continue to trade today. This is why it is so important that our staff adhere to the highest standards to ensure that customers fully understand the features of the product. I am not satisfied that we have met those standards in all cases.
“Following discussions with the British Business Bank [the body established by the Government to manage the scheme], we have taken action to put this right. We have now made sure that EFG loans will always be given appropriately. We are implementing a thorough and proactive review of affected, and potentially affected, customers.”