Treasury Committee
Oral evidence: RBS Independent Lending Review
Wednesday 22 January 2014]
Ordered by the House of Commons to be published on Wednesday 22 January 2014
Members present: Mr Andrew Tyrie (Chair), Mark Garnier, Stewart Hosie, Andrea Leadsom, Mr Andrew Love, Mr Pat McFadden, Jesse Norman, Teresa Pearce
Questions 1-88
Witness: Sir Andrew Large, Chairman, Independent Lending Review, gave evidence
Q1 Chair: Good afternoon, Sir Andrew. The reason I am beginning so promptly, even while your audience is appearing behind you, is we have votes in only <a quarter of an hour and then we will break off and resume.
You have written a very interesting report on RBS’ shortcomings. Can you explain the relative failure of SME lending performance by RBS in terms of a lack of strategic coherence?
Sir Andrew Large: Yes, Chairman. I think that the context has to be seen in terms of <2007-08. Here was an organisation that collapsed and has been through extraordinary turmoil in going through the process of survival and rebuilding itself. It is fair to say that that process of survival and all that goes with it—and there has been a lot, whether it is in terms of assets, building the balance sheet and so on—has caused the forward-looking businesses and the SME business perhaps, which is the one I was asked to focus on, to suffer somewhat. I think that is the underlying reason that today we find this situation.
Q2 Chair: Is this because, understandably, Stephen Hester and the most senior management team were focused on what could be described loosely as investment banking objectives, on restructuring the balance sheet and reducing the size of the balance sheet?
Sir Andrew Large: I think it was to do with reducing the size of the balance sheet. I do not see that as being related particularly to the investment banking aspect, because the—
Chair: I am describing that as an investment banking-type activity, getting the bank—
Sir Andrew Large: Clearly. On the other hand, the reduction of the assets has had to involve a significant reduction of lending assets in the SME area itself. As you are all aware, the build-up of lending in the SME area was very, very significantly focused on commercial real estate and it was quite clear that the percentage of commercial real estate in the balance sheet had to be reduced. That required the actual asset base to be reduced, and you can see this puts an immediate tension on to the totality of the SME business, but I think that is quite different from any aspects of this relating to investment banking.
Q3 Andrea Leadsom: Sir Andrew, to what extent were SME lending problems at RBS caused by a failure of senior management?
Sir Andrew Large: I think it is part of what I have just been saying. Whether you call it failure or whether you say that they were so preoccupied with the whole question of, “How do we survive?” but I think it is fair to say that the overall SME business did suffer. It just was not all brought together and the moving parts were not joined up as effectively as they could have been.
Q4 Andrea Leadsom: You say in your report that you interviewed a selection of managers at RBS. What was the range of feedback that you had from them about what sparked the SME lending problems?
Sir Andrew Large: I think that they could all see that the SME lending problem started with the very considerable over-emphasis on real estate up to 2008 and everything since then has had to be unwound. I give you a case in point: one of the issues—and there were many that came out in this report, and you will have maybe read this—is the whole question of the skills of the relationship managers. In the period up to 2008, the cry was, “We want more assets. We want real estate assets” and the skills needed to acquire real estate assets are rather different from the skills needed to lend to SMEs, where you have to understand their business, understand the cash flows and so on and so forth. That is just one example of where the knock-on effect of what happened back then is still being felt now. The question is, why was it not acted on earlier?
Q5 Andrea Leadsom: Yes. Just before you answer that, because that was going to be my next question, why didn’t they do anything about it<? You have said that the skills needed to assess assets as opposed to cash flows were rather different. Was there also a skew in their credit-scoring systems? Was there any sort of systemic issue or process issue like that that favoured the build-up of the physical asset, as opposed to cash flow type of assets on the balance sheet?
Sir Andrew Large: I am not sure I can answer that wholly. My impression is that the build-up of real estate assets was just a straightforward statement of intent, that that is what they wanted. They wanted assets that were related to real estate, and the collateral being available. You do not have to do the same analysis as you do for the actual trading operations.
Q6 Andrea Leadsom: Yes, but over the last 15 to 20 years, banks have started to rely more and more heavily on the credit scoring, haven’t they?
Sir Andrew Large: Indeed.
Q7 Andrea Leadsom: Certainly from talking to my own businesses in my constituency, there is a real sense that they look at a list of ticks and if you do not meet those ticks, then forget it. In fact, just very recently talking to a very cash flow positive business that cannot get a loan for love or money, versus an asset-rich business that can, they worry that there is a skew in the credit-scoring process, but you did not come across that at all?
Sir Andrew Large: When you say “a skew in the process”—
Andrea Leadsom: Towards physical assets as collateral, as opposed to cash flow type businesses.
Sir Andrew Large: As I say, I am not sure that that was very relevant in the build-up to 2007-08, and since then it has not been relevant, because they have been trying to cut it back. Clearly RBS are very involved in credit-scoring activities, particularly in the smaller end of the SME area. There is no bias in favour of real estate in that today—rather the contrary.
Q8 Andrea Leadsom: Just to be very clear, you do not think that there was anything in their credit-scoring process that caused them to turn heavily towards real estate assets?
Sir Andrew Large: No, I do not.
Chair: We will have to adjourn, but already we are into one of the very important questions and Andrea will have the floor when we return. I apologise, Sir Andrew.
Sitting suspended for a Division in the House.
On resuming—
Chair: We are back in session. Andrea Leadsom.
Q9 Andrea Leadsom: Thank you, Chairman. Our apologies for that.
Just to finish off on my last line of inquiry then, and to be very clear, it is your view that there was not an over-reliance during the period 2007-08 onwards on a credit-scoring system that favoured real estate investments over using the lending manager’s discretion. Am I putting words into your mouth or does that accurately reflect your view?
Sir Andrew Large: Since the crisis, there has been every intention of reducing the amount of real estate, so I do not think that there has been any skew in either method of evaluation.
Q10 Andrea Leadsom: That does not quite answer the question—maybe I am not putting it right—but in building up an enormous real estate portfolio, would you say it was all the brainchild of the lending managers or was there a skew towards building up real estate assets as a result of the credit-scoring system in use at the time?
Sir Andrew Large: I think there was a skew to building up real estate, because from the top of the bank, that was the message as to what was wanted.
Q11 Andrea Leadsom: So the decisions were taken by people, not by a process or a credit-scoring system?
Sir Andrew Large: I daresay that the outputs of credit scoring at the time will have been looked at in terms of whatever was coming in. They will have been favouring real estate-related lending at that time, but absolutely not since then—rather the contrary.
Q12 Andrea Leadsom: To your knowledge, has the credit-scoring system been revised to reflect a less strong requirement for real estate assets now? Has the actual process been changed?
Sir Andrew Large: I think in all the banks, and it is certainly the case in RBS, the credit-scoring processes are improved with experience as time goes on, but there is no way in which they are slanted towards that particular sector.
Q13 Andrea Leadsom: To my constituents who have businesses and say that they believe that, because they do not have assets, they just have cash flows, they are unable to get lending, which they put down to the use of systems as opposed to brains, you would say that you have not seen any evidence that is correct?
Sir Andrew Large: No. I think where lending is based on cash flow analysis, what has happened is that RBS has become more cautious because of the need for greater prudence, which also arose from the credit crisis. What we did find evidence of was that the skills of some of the relationship managers, although significant attempts are being made to rectify this, are not as high as they might have been in that field. One of the reasons for that is that many relationship managers who were particularly skilled were moved from those roles into looking after customers who were entering distress of some sort. If you like, there was a deficit of capability in that field, which of course the bank is doing what it can to rectify.
Q14 Andrea Leadsom: Going back to the organisation then, I think you were starting to say some time ago what the sense of those you interviewed was about how it was allowed to happen and could they have done anything to rectify it and when.
Sir Andrew Large: I referred earlier to the need to rectify the balance sheet. There was something else that went on as well, which was that there was an emphasis on collecting deposits rather than lending. As you can imagine, that was pretty successfully carried out, but it was to the detriment of the lending, which is what the terms of reference of my study were all about. That is just another example, and then the skillsets I have already referred to.
Other things that intervened were that there was a definite emphasis on relationship managers not to put up credits for proposals unless they were clear that these had a reasonable chance of success. Equally, there was an emphasis on if you did put up credits that were not successful, maybe that was not going to be very good for your career. You can imagine that made the relationship managers somewhat risk averse.
The other side of that coin was the people involved in credit analysis likewise basically were encouraged to be very careful and very strict and not let anything through that might be a problem, so they became risk averse. If you have these two elements of risk aversion, I am not surprised that some of your constituents may have found cases where they thought, “Look, I have a good proposition here” and that did not go through.
Q15 Andrea Leadsom: So in spite of the fact that there was an objective of supporting the SME sector since the crisis, in fact, in reality the organisational structure was working to the absolute opposite end?
Sir Andrew Large: I am not sure I would put it the exact opposite, but certainly the intent and the objectives did not take account of the constraints of the sort I have just outlined.
Q16 Andrea Leadsom: Was there a single point of overall accountability for meeting this objective of ensuring more SME lending? Is there one person you can say was responsible for ensuring that happened?
Sir Andrew Large: Not really. When it became clear that the deposit aspect had been solved and that the lending numbers were not looking good, the bank did alter its emphasis in favour of lending. Since that time I think it is fair to say that there have been efforts from all the various parties to live up to that, but the headwinds that we have just referred to earlier meant that the aspirations they then had just could not be met, and so one has this sense of deep frustration, which I have to say I think is felt deeply within the organisation. The organisation itself feels very frustrated—they feel frustrated that, “Look, we want to succeed, we want to lend, but somehow it has not all come together”.
Q17 Andrea Leadsom: To what extent is organisational fragmentation to blame for that? Your diagram shows that nearly all SME businesses reported into the Commercial Banking Division or the Head of Risk and Restructuring.
Sir Andrew Large: Yes.
Andrea Leadsom: Should one of those have been responsible overall and were they?
Sir Andrew Large: May I answer the question about fragmentation? It is quite important, I think. It is fair to say that in the lead-up to the crisis, there was relatively little fragmentation in the SME lending area. It was very focused, but it was very focused on one thing, which was building up real estate assets. Not exclusively, of course. I should not exaggerate and I do not wish to. The fragmentation, which has taken on several different dimensions, has occurred since then and there are several aspects of that fragmentation. One is that there was a distinction made between the so-called core assets that they wanted to keep and the non-core that they did not wish to keep. Some of those non-core were in the SME area. Secondly, there was the enforced divestment of the so-called Rainbow business, which as you know is to be sold. Again, that had to be carved away from the SME area, but it still has SME activity within it.
There is then this question of customers in distress, and you may wish to discuss this at greater length later, I do not know. The fact is that significant numbers of SMEs that were entering distress of some sort, but were capable of turnaround in most cases, were moved from the SME area into the Global Restructuring Group, which as you suggest reports to the Head of Risk rather than to the Commercial Banking Directorate.
Chair: We are going to come on to that in more detail.
Sir Andrew Large: I suspect you will, but there is one other aspect of fragmentation as well that is within that area and that is the so-called Business and Commercial Division, which is the main engine, and has alongside it, but does not report to, the more specialised areas of SME finance, invoice financing and so on, which they report at the top of the Commercial Banking Division, not at the Head of the SME. I think it is fair to say that there is pretty fragmented overall SME activity.
Q18 Andrea Leadsom: It would be true then to say that there was nobody with overall responsibility for seeing that the objective of supporting the SME sector was met?
Sir Andrew Large: I suppose in a strictly hierarchical sense, the soonest it comes together is at the level of the Chief Executive.
Q19 Andrea Leadsom: Just one last question. You said capital was made available to the SME business through the internal budgeting system to enable lending growth. Do you think that that capital was adequate? Is there anything you want to say about the process by which that was made available?
Sir Andrew Large: Yes, I think it was adequate. The lending performance was not adversely affected by any lack of capital or indeed funding. Both the capital and the funding were available and budgeted for and I am not aware of any process that gave any constraint to that. The problems arose in the other field we were just beginning to talk about.
Q20 Stewart Hosie: Sir Andrew, your review found that, prior to 2013, staff priorities were not focused on lending, but rather on deposits and risk management, in the main. To what extent did this reflect directives sent or incentives set by senior management?
Sir Andrew Large: I did refer a little bit to this and my answer therefore is in the same direction, that the emphasis on deposits was part of the survival of the bank. It was the recreation and strength of its balance sheet. Of course the decisions that led to that happening were taken at the top of the bank and were implemented. This changed in 2011; it went on until 2011.
Q21 Stewart Hosie: But of course building the deposit book and the exercising of effective risk management, they were still key priorities in 2012.
Sir Andrew Large: Yes, I have forgotten the precise date when the emphasis on lending was articulated much more clearly.
Q22 Stewart Hosie: I was going to ask that. Given that that was the figure in 2012, but that that changed, so building the deposit book as a key priority collapsed at 1% in 2013, how much of that was a symptom of senior management focus not being on lending and how much of it was the senior management focus simply on survival and packing the balance sheet?
Sir Andrew Large: It is impossible to give you percentage numbers in either direction, but certainly the way I have reflected on it is that it was part of the continued concern for survival that had given rise to this and lending—just taking on the forward-looking activities, in a sense—took on a lower order of priority. The fact that it went on until so recently of course is one of the reasons that the bank is still struggling to get back to where it wants to be.
Q23 Stewart Hosie: I think we all understand the survival motive, self-evidently, but how much of those priorities—possibly skewed priorities—were reflected in staff remuneration? For example, did hitting deposit targets generate a bonus or a greater weight attached to that kind of activity in terms of remuneration? Was that incentivised in that way?
Sir Andrew Large: There will have been an element of it. The whole incentive structure and the way that incentives are set in these areas has of course itself evolved over the last few years so that now any bonus that is given is on a fully discretionary basis, as opposed to there being some automaticity behind a series of numbers. But within that, of course there would have been elements—and I believe there were elements—of encouragement and incentivisation—therefore, “How successful were you in gathering deposits?” But that will not have been the entire basis on which any such bonus would have been considered. It would have been an element and of course the income from lending, as opposed to lending numbers, is also an element, but I think the bank is very conscious that if you have an incentivisation to people that is, “Go out and lend” then that may not give you the results that you want in terms of the quality of the lending. One wants to have a very balanced approach and I think that the bank has tried to put that into effect.
Q24 Stewart Hosie: I appreciate that, and it is sensible, not simply to lend for the sake of getting lending numbers up, but to lend safely. But if you look at what the staff believed their number one priority was, growing lending was only 18%.
Sir Andrew Large: I know. It is very stark, isn’t it?
Q25 Stewart Hosie: Do you think management were aware that the staff understood or the staff believed that lending was not a priority?
Sir Andrew Large: I am not sure they thought about it as deeply as they ought to have done at that time, to be frank with you. I think that the priorities were at that time more in favour of the gathering of deposits and the thought that somehow the bank was going to find itself in quite such a sense of criticism for not lending had perhaps not dawned on them in the way that today is all too apparent.
Q26 Stewart Hosie: I am quite surprised at what you have said there, and I have no reason to doubt that was perhaps the view of management within the bank, but the inability to lend, the failure to lend, the constant complaints to MPs from SMEs in particular, this is not an issue that has taken place over the last year or 18 months or two years. Over the last three or four years, we have all been knocking on the door of Treasury Ministers and banks saying, “Why are you not lending to this viable business?” I am quite surprised that the bank management were not hearing and feeling that as well.
Sir Andrew Large: I think they were also very concerned about the prudential and risk aspects. Having had the trauma of the whole bank’s survival being called into question by virtue of bad lending that had happened up to the crisis, standards there were significantly raised, both as an internal matter and as a result of external pressure from the regulatory community. The priorities of management were focused, as we were discussing, on the deposits, they were focused on improving the prudence with which the lending took place. They were not focused to the same extent on, “We have to work to make sure that the lending numbers do go up”. Indeed, you can see that there is a tension here. It is not an easy one to answer.
Q27 Stewart Hosie: I am very sympathetic at a macro level to that argument, the banks must be safer, but what I am trying to get at here is an understanding that the bank’s core loan to deposit ratio had been achieved in 2011, so I am trying to understand what was it culturally within the bank that still led a small number of the people to believe that new lending was a low priority in 2012, but that taking deposits was a high priority when that ratio had already been met? Was there a lack of communication in the bank?
Sir Andrew Large: I was surprised as well. I think there was. I think that there was a disconnect between what the top management of the bank viewed as being the priorities and the actual actions in the field. Some of the areas here are quite interesting. If you take the <exhortation to people to lend more prudently, the actual communication of what that meant is not straightforward and I am not sure that it was handled as well as it might have been, so that they understood what it was they were meant to be doing without becoming risk averse themselves. Yes, whether you put it as errors of communication, the communication aspect of this in a broad sense I think was very important.
Q28 Stewart Hosie: Were you able to get some information about how that message on lending went from a board level to the senior executive and then down the line of communication, down the management chain? Were you able to have information provided by the bank that would explain how that was meant to happen that might explain why it did not happen?
Sir Andrew Large: What we certainly looked at in some detail was what were the objectives or, if you like, the targets that were being laid down. We were then also able to see very clearly the extent to which that did not occur. We found ourselves then asking the question, “Why didn’t it occur?” There was no silver bullet in this. There were a whole raft of reasons, including that of communication that I just referred to, that led to that happening.
Q29 Stewart Hosie: Do you think they have sorted that out?
Sir Andrew Large: I think that they are determined to sort it out. This whole study that I was asked to undertake I think demonstrates a determination to do something about it. They have realised that this is a serious issue and I think they are determined—in fact, I am sure they are determined—to overcome it.
Q30 Stewart Hosie: I have one final question on a completely unrelated subject. On page 22 of your report, you have a breakdown of the average economics of SME lending: the capital costs broadly unchanged since 1980; the risk costs broadly unchanged; operating costs unchanged; the base rate collapse to the near-zero band, but the funding costs go up from zero or a fraction of a per cent for the first decade to a half or more of the total actual price.
Sir Andrew Large: Yes.
Stewart Hosie: I was surprised to see that, because the base rate is so low.
Sir Andrew Large: I think this was very much a function of the aftermath of the financial crisis and trust in the banking sector as a whole.
Q31 Stewart Hosie: But that runs up to 2013, this graph.
Sir Andrew Large: Yes, and one would hope that those numbers are going to improve and indeed are improving.
Q32 Stewart Hosie: So that was purely a function of lack of trust, lack of confidence and a high market price for cash?
Sir Andrew Large: Yes.
Q33 Mark Garnier: Good afternoon. Can I turn to the Tomlinson report, which I am sure you have had a chance to have a quick look at<? I think it was sent to you about a month before your report was published. You have had a lot of experience in compiling reports of an intelligent and thorough nature. What was your opinion of Lawrence Tomlinson’s approach to compiling his report and do you think it was as thorough as it could have been?
Sir Andrew Large: This was a report put together by somebody who has strong feelings about the SME area, who clearly is very concerned about SMEs that are in distress and who put together a combination of some comments about structure of market and so on and so forth, with assertions of behaviour within RBS. I think it is quite an unusual report in that sense, and as you will have seen in my report, when I became aware of the allegations, it was quite clear to me that these had to be investigated. I do not know whether the allegations are true or not true, but they had to be investigated, and indeed that is what is happening. Section 166 from the Financial Conduct Authority has been launched, with a view to seeing whether those allegations are founded or not founded, and we shall no doubt hear the answer to that reasonably quickly, I hope.
Q34 Mark Garnier: I hope so. Having the Treasury Select Committee or the Banking Commission then looking as a critique, if you like, of how reports are compiled, it does not necessarily look to be the most thorough of reports. There are certainly allegations. It was quite interesting, the first version included allegations against Lloyds and Barclays, I believe, but the version that was ultimately published only shows RBS. However, notwithstanding that, there are certain elements of it that do resonate, I think, with a lot of members of the public and certainly Members of Parliament about what is going on. I wanted to test your reaction to some of these ideas that are coming out of it, one of which is this almost engineering of businesses to go into greater stress, if you like, in order to create a default event.
An anecdotal straw poll test of a constituency MP would suggest that broadly speaking there are three different types of SMEs that are out there. The first is the type of SME that has a very strong balance sheet and a very strong cash flow and is the type of business that is pre-selected for a £10 million overdraft, “Congratulations, you are the model customer for our bank. How can we help you more?” The second is the type of business that has a very, very badly-damaged balance sheet, but also very bad cash flow, and those businesses seem to be the ones that the banks are quite keen to offer extensive forbearance to on the basis that the cost of funding them is only 50 basis points a year, so it is quite easy to do.
The third seems to be the type of business that falls within, broadly speaking, the Tomlinson type of idea, which is where you have a business that has a pretty strong balance sheet, but has cash flow problems. This is absolutely the area where banks, if they are seeking to shrink their balance sheet and shrink their exposure to SMEs, would find an opportunity to do it, because of course the business is possibly in a default event, it perhaps has not met interest payments, the cash flow issues have created a problem, but nonetheless the balance sheet suggests to the bank that there is a good opportunity for the bank to recover the principal of the loan. Those are the types of businesses that are falling within this, if you like, rather aggressive approach by the banks. Do you think that is a fair summary of what is going on?
Sir Andrew Large: I do not know. That is what I hope we will get to the bottom of when the 166 investigation is underway, because within what you have said, there are obviously some very serious assertions. Perhaps I can just make some observations on why I think that there are elements of, if you like, plausibility in some of the assertions that are made, without having any idea as to whether those assertions are true or not. It comes to a significant extent to questions of organisation and governance. When a bank lends to an SME, the two parties have a common interest in the SME being successful in servicing the debt, paying it down and the relationship continuing. That situation is the case right up to the point where the decision has been made that this organisation is irretrievable and therefore the interests have to diverge as between the bank and the customer in that resolution has to take place in the interests of the shareholder, recovering what can be recovered.
The situation that I commented on in the review, which I gave a lot of thought to—and indeed, it was partly with some of the assertions that are in the Tomlinson report, but also ones that we had heard from elsewhere—is that the ultimate decision as to which SMEs will be handled by the Global Restructuring Group is made by the Global Restructuring Group. They have the say. Equally, the decision that might be made at a later stage that the organisation is beyond retrieval and has to be resolved is made within the Global Restructuring Group, which is an internal profit centre within the bank. Perceptionally, and I would also argue in other ways as well, I think that is flawed, because up to the time that the organisation is irretrievable, it seems to me that the interests in making sure that the mutual interests of the bank and the customer are held together should be owned by the SME unit itself.
There is an argument that I understand, having been in the banking business myself at one time, that the party who has the relationship will be reluctant to admit failure of the party for whom he or she has a responsibility, and therefore there would be forbearance, which would mean that companies would collapse before they had been able to be helped to turn around and get themselves back into mainstream activity. That argument is used sometimes to say, “Then that ought to be done by a whole set of different people” and hence the argument that it should be done by a bunch of specialists, a group of specialists in GRG. All my experience tells me that the people within GRG are extremely experienced and very good at their job, but from the point of view of the SME it may not look that way. If you are an SME that maybe has some difficulties, as many companies have, but is clearly not in any sense close to having to be resolved and then you find yourself getting into GRG, you may say, “Oh, my goodness. What has happened? I seem to be now being treated in a completely different way” and the way in which that happened may or may not have been handled in a very sensitive way. At this stage, I think as a result of this mixture of perception and fact, there is a real problem that many SMEs will feel very uncomfortable and many of them will say so and you will get complaints of the sort that began to emerge.
When you then move to the next step, which is that GRG has the responsibility also for making the decision as to when an organisation should be resolved, and when it is known that GRG itself is a profit centre, then you can see that perceptionally the sort of assertions that there are in Dr Tomlinson’s report, they sound plausible. Equally, those statements are so strong, and the behaviours that could <lead to that happening would be so extreme that one wants to feel they cannot be true. That is why I think this forensic work that is going to be done—and is being done now—is so important. I am sorry to answer you at such length, but I think it is obviously very important and I know an area of great public interest.
Q35 Mark Garnier: That is an incredibly helpful answer, thank you for that. I was going to test you slightly on one thing, which is that what seems to happen is before you get to GRG, you go through an SME support type of—
Sir Andrew Large: Sometimes, but again, this is not a very clear situation. Some SMEs do go into a support unit within the SME area, which is called Special Relationship Management. Some of them get their relationship manager moved from being their mainstream relationship manager to a special relationship manager and some of them have a second move to GRG later. They have then had several moves. For a small organisation that may or may not have problems of whatever depth, you can see this can be a pretty stressful state of affairs.
Q36 Mark Garnier: It can be stressful for two reasons. The first is that a lot of SMEs that I have had experience with—not necessarily with RBS, but with a number of other banks—find that there is a continuity of service, where they have an individual who has an understanding of their business.
Sir Andrew Large: That is right.
Mark Garnier: Of course they find themselves then moving to that support group. The experience I have had when I have challenged the banks on this is they say, “Yes, but you are looking at an SME that is moving from a relationship manager who has maybe 500 customers to a relationship manager who has just 25 customers, so thereby you are getting a multiple of times of the effort coming into it”.
Sir Andrew Large: Sure.
Mark Garnier: However, to receive that service, it is much more expensive, so while it is economically viable to have one relationship manager looking after 500 SMEs, it is not if you are not charging. That is why they have to charge these SMEs to have, if you like, a one in 25 relationship as opposed to one in 500, which of course sounds very logical until you are looking—
Sir Andrew Large: Until you are the SME.
Mark Garnier: Until you are the SME, when you have to stretch—
Sir Andrew Large: Yes, and then you find it exacerbates the problems you already have.
Q37 Mark Garnier: It exacerbates the problem, absolutely right. I too have worked as a banker in the past, actually with you many years ago, and we will talk about it later, but I also worked as a business consultant and I was looking at a number of businesses <that were suffering from exactly this problem. They were viable businesses, but for one very, very minor reason or another they were tripping across an event. For example, they had a loan to value ratio of 65% and it might have gone to 66% under a new sort of drive-by valuation or whatever, so that triggered some of these things, and suddenly what was a viable business was made unviable for what appeared to be artifically-created default events. This is what tips them over the edge into the problem. I think your point is very valid and very important about this forbearance, where you do have relationship managers who are very reluctant to bite the bullet on the relationship and say, “This has gone wrong”.
Again, I am having more of a conversation than a series of my questioning you and you giving answers, but do you feel that in general SMEs are being well-looked after, or do you think there are very, very legitimate complaints by SMEs about the way they are treated for there to be a serious problem out there?
Sir Andrew Large: I think the very great majority of SMEs are comfortable with their relationship and are being well-looked after. Clearly there are a number where the types of problems we have just outlined occur and the situation that RBS has is one where I think this question of organisation and governance badly needs to be looked at and I believe they are looking at.
Q38 Chair: You answered this question about GRG by saying, “There might be some of this or it could be perception”—I have concertinaed a huge answer— and you are saying you are glad it is being looked at, but you have had a good poke around already. What is your bet? What is your guess?
Sir Andrew Large: I would not be surprised if there will certainly be some cases where SMEs have been treated rather roughly. I very much hope there are no cases that fall into the more extreme category of where effectively they have been put out of business deliberately. That is a very extreme assertion.
Q39 Chair: That is the extreme assertion that is in the Tomlinson report, with which you disagree.
Sir Andrew Large: I do not know whether I agree or disagree, because I have not done the forensic work myself, but I certainly very much hope I would be able to disagree.
Q40 Chair: There is another aspect to that set of questions we have just had, that exchange. Take the business that is not quite in forbearance but is not doing very well—it is on the weaker side, to the extent that they get thrown by GRG into what amounts to a forced sale or some restructuring that breaks down the activity altogether. Since they are just short of the zombie status, to the extent that that is imposed on them, would that not mean that the effect of GRG’s activities will reduce the number of businesses that are close to or are in zombie status?
Sir Andrew Large: Yes. I think the answer is it would, but if your concern—and I know this concern has been expressed—is that there are too many so-called zombie activities being kept alive, then the way in which GRG is being accused, or it is asserted it acts, would ensure that some of them would not be kept alive. But that of course does not answer the fact that you have some exceedingly unhappy people feeling that they have been extremely unfairly treated.
Q41 Chair: Absolutely. I am just trying to clarify whether the Tomlinson—
Sir Andrew Large: There is a tension there though, yes.
Chair: There is the Tomlinson story, which is of great concern, and the zombie story, which is also of great concern.
Sir Andrew Large: They do come together. There is not—
Chair: In a sense, there is a tension between the two, as you put it, and they cannot both be wholly true.
Sir Andrew Large: I think that is true, yes.
Q42 Mr McFadden: I am going to stay on this area, please. Did you find any evidence of RBS engineering businesses into default? That is the heart of the accusation here.
Sir Andrew Large: No, I did not.
Q43 Mr McFadden: You did not. To that degree, do you think your report and the Tomlinson report are compatible?
Sir Andrew Large: As I think I said, there is an element of plausibility in the assertions that are in the Tomlinson report by virtue of the organisational and governance issues that I just referred to, but that does not mean to say that I think that those activities are happening and I did not have any evidence of them.
Q44 Mr McFadden: I just want to pin this down then. You are saying there is an element of plausibility in the accusations, but you did not find any evidence for them. Is that a fair way to—
Sir Andrew Large: That is correct. Indeed, I was not set up to do so, because to find such evidence you have to set up a process, which now has been set up by the FCA under this section 166 process, because you have to have due process with people, the organisations, you have to be able to obtain data and so on, and that requires to be properly set up. It was not territory that it would have been at all sensible for me to try to go into. I could, however, comment on the underlying governance and organisation and did so.
Q45 Mr McFadden: Is it your understanding that his report originally covered other banks, as Mr Garnier said, or was it always purely about RBS?
Sir Andrew Large: I think my understanding is that the only document he has produced that is a report as such is what has been published. Whether he had cases that related to other banks or not, if I am not mistaken, I think in the report that he published, it states that he did have other cases, but that most of them related to RBS, if I remember correctly. I cannot remember the precise words, but I am pretty sure that is what he says.
Q46 Mr McFadden: You apparently received a mailbag of cases from the Department of Business outlining the experiences of individual companies. Is that correct?
Sir Andrew Large: We did. These were not just from Tomlinson, by the way, they were from a variety of sources, so we were aware that there were some significant complaints, yes.
Q47 Mr McFadden: What was your view of that mailbag, because that is probably reflecting the kind of things that we come across? In fact, I think a lot of them were—not necessarily from the people around this table—cases sent by MPs to the Department of Business on behalf of businesses in their constituency.
Sir Andrew Large: Obviously when one reads those assertions—they can only shock you when you read them. Then you have to ask yourself the question, “What are the reasons that these complaints are being made?” That is the bit that requires the forensic inquiry. On the other hand, when I did read them, I immediately started saying, “I want to look at the organisation and the governance” so when the Tomlinson report was published, I was already pretty clear on those aspects of it, the organisational and governance ones that are in my report.
Q48 Mr McFadden: When <the report was published, the Secretary of State for Business described the allegations as very serious and said he was appalled by what Mr Tomlinson had found, which Mr Tomlinson said was, “Systematic abuse of corporate customers”. Do you think the Secretary of State was correct to weigh in behind the Tomlinson report so quickly and so heavily?
Sir Andrew Large: I do not know how strongly you feel that is weighing in behind it. My understanding is that as entrepreneur in residence at the BIS, he will obviously have been in touch with and kept in contact with the Secretary of State, so the Secretary of State would have known he was writing the report. I think, as anybody would have done who had read those assertions and was being asked about them, one could only just say, “Look, those are shocking assertions”. If it had been me, I would have gone immediately to state that I wanted them to be looked into to find out whether they were true or not true. I think that is the situation.
Q49 Jesse Norman: Sir Andrew, a number of interviews were taken as part of your report of RBS staff. Did you do any of those interviews yourself?
Sir Andrew Large: With RBS staff?
Jesse Norman: Yes.
Sir Andrew Large: Yes, I did do some of them myself. I did not do all of them at all.
Q50 Jesse Norman: How many would you say you had done and with whom? Two or three, 10?
Sir Andrew Large: No, no, more than two or three. No, I should think sort of 10 or 15. I am afraid I cannot remember precisely.
Q51 Jesse Norman: At junior levels or senior levels?
Sir Andrew Large: I did various things. I met senior people. I also did a couple of visits into the field, because I was keen to see how it worked in practice in place, so I went to a couple of offices where I met relationship managers, I met their assistants, I met special relationship managers, I met GRG people as well. In a sense, I suppose to answer your question, I met a lot more than 15 people, because on each of those, there probably would have been, I do not know, 15 or 20 people.
Q52 Jesse Norman: Do you feel that the Tomlinson report was a professional piece of work?
Sir Andrew Large: As I have said, it is basically a set of assertions. I do not want to repeat what I have just said. I can see why the assertions are made and I would like to know whether they are true.
Q53 Jesse Norman: But do you think they are accurate?
Sir Andrew Large: If I had written the report myself, I would have wanted to put rather more substance behind what the assertions were.
Q54 Jesse Norman: In other words, it is a series of assertions without much substance and without, as it were, the analysis or justification that you would like to see in such a report?
Sir Andrew Large: I suspect that that is what we are going to see through the section 166 inquiry. In a sense, calling it a report, there is a bit of semantics here. It is, if you like, the build-up to a set of statements, “Look, here are cases of SMEs who have been very badly treated and RBS treated them very badly”. That is what it says.
Q55 Jesse Norman: Yes, so it sets a hare running, but—
Sir Andrew Large: It sets it running, but it does not have the answers or provide the basis of being able to make a decision as to whether those assertions are true or not true.
Q56 Jesse Norman: Thank you. I think you said you found some elements of plausibility in these allegations.
Sir Andrew Large: Yes, that is what I was just discussing.
Q57 Jesse Norman: Could you just dilate in a little bit more detail on how far they performed to your experience of RBS or of GRG? Just talk a little bit about why you felt that might be plausible, even though you did not come across—
Sir Andrew Large: No, I think the plausibility as much as anything is because of the organisational and governance arrangements.
Q58 Jesse Norman: The incentives that were set?
Sir Andrew Large: As seen from the outside, the incentives, yes. That is why they are plausible, in the sense that I can understand why somebody would have made the assertions.
Q59 Jesse Norman: So when people are acting as judge and jury in their own cause, then you can find abuse?
Sir Andrew Large: That is exactly the sort of thing I mean.
Q60 Jesse Norman: Yes. Tomlinson also says that he thinks that RBS and Lloyds should be much smaller. Do you think that is right?
Sir Andrew Large: Lloyds was smaller?
Jesse Norman: No, he thinks that RBS and Lloyds should both be made much smaller.
Sir Andrew Large: Oh, that. Oh, I beg your pardon.
Jesse Norman: Do you think that is a good idea?
Sir Andrew Large: That is a very different point. I think he goes a lot beyond that, and if I recall correctly, he made some comment about splitting them into six units or some such. Look, to be honest with you, I think that is a very extreme suggestion. If you look at how difficult it has been for RBS to carve out the Rainbow business and the difficulties it has given rise to for RBS in so doing, because if you take the SME business, you have continuing activity on the ongoing business, you have the SME business within that which is being hived off. The thought that those two banks would somehow be split into six does strike me as being a very extreme suggestion.
Jesse Norman: Fanciful.
Sir Andrew Large: I simply do not understand how it would happen or what it would be meant to achieve, to tell you the truth.
Q61 Jesse Norman: But it does not sound like you demur from the idea that in part it was the size of RBS that caused its management to be distracted and unable to focus on these issues in the SME market.
Sir Andrew Large: No, I am not sure that I think it is all about size. Going back, I think it is to do with the problems they had that they had to fix. I know that of course the bigger you are, the more complex the management processes can be and therefore the more important it is that you do not have a fragmented business, for example. But I do not think it is to do with size in and of itself.
Q62 Jesse Norman: On RBS, let me just ask you a question, which is, do you think changes are needed to the incentives and pay or remuneration of the GRG group?
Sir Andrew Large: I think that the GRG group is asked to do a job, and to my best knowledge, does the job very effectively. The question is whether the job they are asked to do is the right job, given the SME environment and the issues we just discussed. I have not looked at this in terms of there being wrongly-set incentives for GRG people, in the sense that the GRG people are doing what GRG is meant to do, which is to, on the one hand, try to turn businesses around and get them back into the mainstream, but on the other, where that cannot be achieved, to resolve them in a way that gives the maximum return to the shareholder, which at that stage becomes the leading point.
Q63 Jesse Norman: But there are two problems, are there not? First, is the GRG structure setting the wrong incentives, and that would mean a change to the nature of GRG in the way it set itself up as judge and jury, as we discussed? The second question is, if it could be shown, for example, that some of these allegations were true, whether or not there should be implications for GRG staff in terms of pay, remuneration, all that stuff—
Sir Andrew Large: Oh, look, if the more extreme allegations are true, that will be a very serious matter. I think that is all I need say.
Q64 Jesse Norman: Good, thank you very much. On another topic, can I just ask you about the letter you have written in relation to the remit for the FPC? You have said there you would favour a single objective with an override.
Sir Andrew Large: Yes.
Q65 Jesse Norman: Do you not fear that the danger there is that without the discipline of having to think about the economy and, as it were, the Government strategy for growth, the result would be stagnation, the FPC would be presiding over a kind of mortuary rather than—
Sir Andrew Large: No, I do not think that at all. I think that the FPC was formed because there was no macro-prudential capability. In fact, when I was at the Bank of England, it was one of the things that I lamented did not exist, so I have thought about this quite deeply. On the other hand, forensic analysis and policy choice in the financial stability area is extremely difficult, not only that, but you have to do it the whole time, because it is no good just worrying about financial stability when there is a problem, you have to be worrying about it when there is not a problem. If you worry about it when there is not a problem and you start making policy choices that look to those who favour, for example, growth as though they are holding it back, then it puts you in a very difficult position, because on the one hand, the policy choice you need for financial stability might be quite clear to you, but on the other, that is something that those who have the responsibility for the overall economic policy and growth will not feel very comfortable with.
Q66 Jesse Norman: What would a classic example be that shows the tension between these two objectives, as you see it?
Sir Andrew Large: I think that there would be a tension if it would ever be the case that the Financial Policy Committee would believe that a policy decision needed to be made that would, for example, reduce the level of indebtedness or perhaps have an implication for the value of property at a time when it was felt that, from the point of view of the overall economic objectives set by the Government, the growth of the property market was more important. That would be very difficult. This is the point I am trying to make in the letter, which is that the responsibility for growth and the economic objectives is a responsibility, it seems to me, that is vested in Government and in Parliament.
Q67 Jesse Norman: But no Government is going to want to exercise what would inevitably be the nuclear option of overruling its own recently established, in this case, regulator.
Sir Andrew Large: No, but the FPC itself, I am not suggesting the FPC would be blind to what its policy measures would entail, not at all, but there are different ways in which you can achieve them. I will give you an example, and I think it may be one that you have discussed here in another context. If, for example, you were looking at property, there are various ways you could act. One would be loan to value ratios; another might be loan to income ratios. Each of those policy choices would have different implications, for example, for home ownership. I am aware of the exchange of letters that you, Chairman, had with the Governor on that very subject, where the responsibility for home ownership clearly lies with Government, it does not lie with the FPC. The fact that I am suggesting that there should be, under certain circumstances, an override does not mean to say the override is going to be used very often. I would expect it to be used very infrequently.
Q68 Jesse Norman: But inevitably the officials on the FPC are going to be very reluctant to consider growth if it is not part of their statutory objectives, is that right? In fact, since the Government will only very rarely want to be in an outright disagreement with the FPC, the effect of that is that growth will essentially be ignored in its functioning.
Sir Andrew Large: I do not think that is the case at all, because if you know that there is a potential for an override and you know there are other means of achieving the objective you have, then you will use the other means.
Q69 Jesse Norman: A final question: why would a Government ever want to have an argument with the FPC, where the politics of it are that its body is prioritising stability over growth and therefore it could potentially itself be criticised for overruling its experts in a pursuit of growth?
Sir Andrew Large: I would hope that the Government, having set up the FPC, would want the FPC to be devoting its time to thinking about financial stability, whatever the circumstances, and perhaps to having to act on that basis. The things the FPC will need to do will often be pretty unpopular and I think it was a brave move to set it up, I think it was a good move to set it up. My letter is because I am concerned in the long term that unless this tension is institutionalised and unless the responsibilities are made clearer that the responsibilities for growth and all that goes with it lie with Government, not the FPC, and the responsibility for financial stability lies with the FPC—I think it is better for it to be done that way.
Q70 Jesse Norman: But a populist Government, if it wished, could then simply overrule the FPC, whereas as matters presently are, it would have to disband the FPC or reorganise its objectives in order to be able to get its way.
Sir Andrew Large: That is correct. On the other hand, we live in a democracy and I assume that people have to be quite mature about this. The thing has been set up by Parliament and I think that it has been set up for the purpose of financial stability.
Q71 Chair: What is the purpose of financial stability, Sir Andrew?
Sir Andrew Large: I think the purpose of financial stability is to avoid the type of bust that we had in 2008. Underneath that, if you do have financial stability, it is a basis on which growth can take place. Without it, you do not have growth.
Q72 Chair: Isn’t the purpose of financial stability to create some of the conditions essential to long-run growth maximisation?
Sir Andrew Large: Yes, it is.
Q73 Chair: Therefore, if we now turn to what the Act says, it says that the Financial Policy Committee should exercise its functions with a view to the achievement of financial stability, and subject to that, subordinate to that, to support the economic policy of the Government.
Sir Andrew Large: Correct.
Chair: Including its objectives for growth and employment. It does strike me that the FPC—on my straightforward reading of that, correct me if I am wrong—has everything it needs to pursue the task of obtaining financial stability in order to provide that basis for long-run growth.
Sir Andrew Large: The words that you use are obviously right and the implications would be right were financial stability similar to monetary policy, but they are not. In the case of monetary policy, which has similar sets of wording, it works because the objective in monetary policy is observable, you know what price level you have and you can steer in order to seek to achieve it. In the case of financial stability, it is not observable until such time as you have failed. The question is how close to that point are you going to wish to be, and there is going to be continual argument about that. My suggestion is that is something that Government has to be prepared to say, that on the one hand, the Government has to be prepared to form a view on whether the stance that the FPC is taking is moving towards the economic graveyard—I think those were the words that the Chancellor may have used—or not. It is a—
Chair: Jesse described it as a mortuary.
Sir Andrew Large: The mortuary, right. But that is a decision that has to be made, because the closer you get to that potential cliff, the greater the danger that you tip over it. If you tip over it, then unlike in the case of monetary policy, where you can steer back to your 2% or whatever your target level is, in the case of financial stability you have failed, you have had a crash, and you then spend years getting out of it.
Q74 Chair: The Act is asking <for this balancing act, as you move towards this cliff or make these trade-offs, call it what you like, to be conducted by the FPC, subject to a nuclear option available to the Government of an override. That is what the Act of Parliament says at the moment. You are suggesting, as I understand it, that the balancing act be removed from the evidence, that the FPC have only one task, which is to keep you well away from that cliff edge, because they will only be given one objective, which is financial stability, and then for the Government to prompt them all the time to place them—using its democratic authority, the authority that comes with the ballot box—back towards that cliff edge.
Sir Andrew Large: I would not expect it to be all the time, Chairman. I would expect it to be perhaps a six-monthly or <an annual prod, rather similar to the one that can be given to the Monetary Policy Committee, if they so wish.
Q75 Chair: It has not been given to them every six or 12 months.
Sir Andrew Large: No, it has not.
Chair: It has been extremely rare.
Sir Andrew Large: But nonetheless, it could be done, and I think that the different circumstances of financial stability people would be wise to take into account.
Q76 Chair: It is a very interesting letter and I am very grateful to you for writing it. You have raised an important issue of concern in a new area of legislation that one day could be tested to its limits and beyond.
Sir Andrew Large: That is right.
Chair: It is important that at its inception it is given adequate scrutiny, unlike, I am afraid to say, the Financial Services and Markets Bill, on this very issue, on the issue of the conduct of systemic risk and the putative performance of the tripartite, where those of us who raised it were more or less shouted down and told we were wasting Committee and Parliament’s time.
Sir Andrew Large: Thank you.
Q77 Chair: Have we more or less covered this point?
Sir Andrew Large: I think so.
Chair: There is nothing else you want to say that you have not already put on the record?
Sir Andrew Large: No.
Q78 Chair: Can I return to the main theme of the hearing then and just clarify a couple more points? I am summarising, I am drawing things together. You have said when it comes to the dysfunctionality of lending—and we are agreed that there has been dysfunctionality of lending and, probably still is, lending performance in RBS—capital is not the problem. The fact that they are trying to find ways of rebuilding their balance sheet in order to satisfy capital requirements is not the problem.
Sir Andrew Large: That is correct.
Q79 Chair: Therefore, specifically, the Bank of England’s tightening and the PRA’s tightening of capital requirements, which they did in conjunction with the FPC—this is the 7% RWAs—as it has been alleged by the banks, from what you can tell by looking at RBS, should not have led to a reduction in lending?
Sir Andrew Large: That point is a little bit more moot, because of course if you look at the affordability of debt from the point of view of the SMEs, and you think in terms of what cash flow they have and what is a prudent ratio, if you like, of the cost of debt to the cash flow they have, clearly to the extent that the banks are caused to try to recompense for the capital that they have to put behind that lending, it will affect the affordability from the point of view of the SMEs. There is an impact, and as a matter of fact, I tried to draw that out in the review. I have forgotten what page it is on, but there are some comments on that point.
Q80 Chair: So <it is wrong to conclude crudely that capital is not the problem, the problem that you have just alluded to would have been true even in the absence of the 7%?
Sir Andrew Large: It is right to say that capital was not a constraint in terms of the availability for those doing the lending in RBS, but the regulatory processes put in place that impact the costs of servicing debt to the SMEs <are an issue.
Q81 Chair: That strikes me as a balanced position to be sitting on, to arrive at on this issue. If I can just keep going with this summary, you have made a large number of points but I am picking out just a few. When it comes to the Tomlinson report, you are vigorously rejecting the idea that we should split the state-owned banks into six on the grounds that this is just not practical and would be a nightmare, and presumably it would throw these banks into a position where they would do even less lending for a good time.
Sir Andrew Large: Also, there are other things going on in the competition arena. As we can all see, there <are peer to peer activities, there are other alternative providers coming into place, so just by dividing what is into six, even if you were able to do it—I agree with you—the actual disruption involved in doing it would be absolutely huge, but even if you had done it, it is not entirely evident to me that it would lead to the output that Dr Tomlinson is asking for.
Q82 Chair: He also alludes to—pretty much makes clear in his report—that he does not support the ringfence, he thinks that should be scrapped and that we should go for Glass-Steagall, even at this stage. What is your response to that?
Sir Andrew Large: I maybe somewhat out of the mainstream in my thinking here, in that not everybody will agree with this, but I am not a great believer in these structural solutions, be they Glass-Steagall, or for that matter Vickers, personally.
Q83 Chair: What would be the effect on lending if we were to go for Glass-Steagall? I am using Glass-Steagall as a shorthand, because clearly that specific proposal would not work. I am talking about full separation.
Sir Andrew Large: I cannot see that it would, on the surface, make any difference to the lending.
Q84 Chair: Okay. Can I end by asking you something that the Banking Commission looked at and then asked the Government to review, which they have, which is the good bank-bad bank split for RBS? Do you think there is something in the argument that that could have addressed or could address some of the organisational problems to which you have alluded by providing more simplification, better lines of accountability and clarity about the structure, and that also at the same time, the creation of a good bank might bolster SME confidence in the good bank that they are now starting to do business with, clearly a bank dedicated to dealing with their concerns and that they might feel they could trust?
Sir Andrew Large: Chairman, there are many aspects to that, and if I could just make several observations. The first is that I think that there is a case for feeling that if there had been a split, good bank-bad bank, back in 2008, it would have had an impact in terms of reducing the amount of capacity of management that had to be deployed on survival, because the good bank presumably would have been in a surviving state and therefore they would have <been able immediately to go into a forward-looking mode. That is the first thing.
The second thing is that I would hope that the decision having been made to go for an internal approach as opposed to a juridical one late last year, in the latter part of last year, that that would be given a chance for success, given that certainly all the people I met in RBS are determined to do what they can to try to make a success of it. With that would come this question of trust that you alluded to. I suppose the question that—
Q85 Chair: Sorry, just on trust, why do you think that people trying to borrow from RBS will be equally impressed by an internal split as opposed to a new bank?
Sir Andrew Large: I was not saying that. I was just saying that I think that if the management is successful in reviving the SME business in the way that they have said that they wish to do, and in following all the recommendations in the report, and no doubt many others, then that ought to be capable of creating a revival of trust. I was not making a statement about that vis-à-vis a new entity.
Q86 Chair: Is there anything else you wanted to say on this point?
Sir Andrew Large: No, those are the two main points.
Q87 Chair: We have one last question area. RBS has accepted your recommendations and as far as we know, they are intending to—and indeed, you have alluded to it on a number of occasions—implement them. Are you going to play any role in monitoring whether they are actually doing that?
Sir Andrew Large: It depends whether I am asked to or not. I have not been asked to. If I were asked to, obviously I would do what I could to help, but I have not been.
Q88 Chair: Thank you, that is noted, and an important point.
Secondly, do you think UKFI is capable of playing a role in all that, in ensuring that RBS lives up to its commitments in response to your report? After all, they are meant to be representing the shareholders in this, and there is quite a lot of shareholder value locked up in these.
Sir Andrew Large: Yes. As the representative of the shareholder, I would imagine that UKFI could indeed play a role vis-à-vis of encouraging the board of RBS to do everything it can to bring themselves back to where they want to be.
Chair: Sir Andrew, thank you very much for coming to see us this afternoon. You have been very patient, not least because we have been disrupted by a Division. You have given us some extremely interesting evidence and food for thought on a number of key questions for the sustainability and the recovery as far as it is affected by lending by RBS and the banking sector generally, and also some interesting thoughts on the FPC’s mandate. Thank you very much indeed.
Sir Andrew Large: Thank you, Chairman.
Oral evidence: RBS Independent Lending Review, HC 1022 28