The Financial Conduct Authority (FCA) has been attacked for refusing to publish an already completed, full report on the culture and practices of Royal Bank of Scotland (RBS) business-rescue wing the Global Restructuring Group. As a summary of the report has indicated, the unit routinely allowed distressed SMEs to fail because it was more profitable to do so.

According to leaked minutes of internal discussions about the report, senior FCA figures concluded: “Publication of the final report would expose the FCA to an unacceptable risk of successful legal action by current/former RBS managers for unfair treatment.”

Controversy over the report’s delayed release has been a major financial story this year, with the RBS-GRG Business Action Group – an alliance of affected business owners – calling for FCA chief Andrew Bailey’s resignation.

Following the watchdog’s latest refusal to disclose the full report, a spokesman for the Action Group said: “This regulator cannot be trusted to safeguard the interests of the thousands of people who lost jobs, businesses and livelihoods because of RBS’s Global Restructuring Group. The FCA can no longer be considered an honest broker. It should step aside.” He added: “It needs to publish its report in full – so that the public, elected lawmakers and the courts, rather than a compromised regulator, can decide what to do about RBS.”

Has the FCA squandered a valuable opportunity here to tackle not just flawed governance in the financial sector – but low levels of public trust in the industry, too?

The Institute of Leadership & Management's head of research, policy and standards Kate Cooper says: “The level of importance that trust occupies in finance is well documented – as is the extent to which the sector has lost trust during what is now approaching a decade since the dawn of the financial crisis.

“The key factors behind creating a climate of trust are openness and transparency. And the FCA doesn’t seem to be applying either of those here. Yes, it may not be hiding anything. But the organisation needs to remember throughout all of its dealings and report-writing processes that it is accountable to a public that will always take significant interest in where its decisions are coming from – and the foundations upon which those decisions are made.”

Cooper adds: “It’s very difficult to create a climate of trust when you’re not being open, you’re not being transparent and you appear to be hiding something. Whether you are concealing material for the right or wrong reason doesn’t really matter. It’s the impression you convey that’s so critical, and so likely to stick in people’s minds. Regulators in particular must appreciate how difficult trust is to build – and how quickly it can be unsettled.”

For further thoughts on how to build trust, check out these learning resources from the Institute

Image of RBS branch courtesy of Alexandre Rotenberg, via Shutterstock