(Adds more detail, RBS and FCA response)
By Emma Rumney and Huw Jones
LONDON, Feb 20 (Reuters) - British lawmakers on Tuesday published in full a confidential report detailing Royal Bank of Scotland's mistreatment of struggling businesses during and after the financial crisis.
"The findings in the report are disgraceful," Nicky Morgan, chair of the cross-party Treasury Select Committee, said.
The TSC said in a statement it had agreed to publish immediately the final, unredacted report, which contains the findings of an inquiry into RBS's then-restructuring unit GRG.
"The overarching priority at all levels of GRG was not the health and strength of customers, but the generation of income for RBS, through made-up fees, high interest rates, and the acquisition of equity and property," Morgan said.
RBS denies the most serious allegations from customers - namely that it purposely pushed firms into bankruptcy to pick up their assets on the cheap. But it has accepted some wrongdoing and set aside 400 million pounds to compensate firms as it seeks to rebuild its image a decade on from the crisis. The lawmakers' decision follows a protracted dispute with the Financial Conduct Authority (FCA), which commissioned the report but has refused to publish it in full. The FCA, which is still investigating the scandal, says it cannot legally publish the report before those named in it have had an opportunity to respond.
FINANCIAL DISTRESS
GRG handled some 12,000 struggling firms between 2007 and 2012 and the report said of the 117 firms in the sample judged to be potentially viable, 92 percent experienced some sort of inappropriate treatment by RBS and 16 percent endured "material financial distress" as a result.
It concludes that the problems at GRG were the result of failures in governance, which meant the commercial objectives of the unit were not balanced against the risks they posed to the customers it was supposed to help.
Throughout the unit there was a greater emphasis placed on income generation and other commercial objectives than there was on those related to turnaround, it said.
"This was not in our judgement a result of idiosyncratic decisions by local managers, but was endemic," the report said.
"This was a failing that GRG management was aware of (or should have been aware of)."
A document written by a team leader in one of GRG's offices, titled "Just hit budget" outlined a list of ways to squeeze more money from struggling clients. It was attached to an invitation to a training session on "how to get a customer to agree chunky fees and upsides and thank you for it", the report said.
The document was widely circulated in that office and shared in at least one other, the report said, while its content and tone went unchallenged at a senior level.
Elsewhere, when one shop that GRG managed went under, staff were invited to take their pick of items to take home.
The report also details complaints of bullying and intimidation, and instances where staff mocked customers.
RBS has said it is "deeply sorry" for the way some customers were treated.
"The culture, structure and way RBS operates today have all changed fundamentally," it said.
(Reporting by Huw Jones; Editing by Louise Heavens/Edmund Blair/Alexander Smith)
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