AN independent European ethics rating agency has dealt a blow to Royal Bank of Scotland Group by assigning it an E- rating, its second lowest.

Standard Ethics (SE) has been operating in Europe for 14 years and is preparing to launch its index of British companies later this year.

Firms are graded from “EEE” to “F” giving the agency’s opinion of their relative level of reputational and operational risk.

It said awareness for rising environmental and social needs and transparent governance models made its ratings a powerful tool for companies to demonstrate their environmental, social and governance (ESG) commitments. The term is used by investors to evaluate corporate behaviour and to determine a company’s future financial performance.

SE said the taxpayer-owned bank had made some efforts to mitigate damages, including reputational, and market distortions caused by recent controversies, and had adopted an appropriate reporting system.

It added: “Nevertheless, its long-term sustainability strategies appear to be vague… and lack of the most basic international references.

“In March 2010 RBS was fined £28.6m by the UK Office of Fair Trading for sharing confidential loan pricing data with rival bank Barclays. In January 2011, more than 100 bankers at RBS were paid more than £1m last year and total bonus pay-outs reached nearly £1bn – even though the bailed-out bank reported losses of £1.1bn for 2010. In February 2013, US and British regulators announced that the bank would pay a total of $612 million to settle charges that it was involved in the manipulation of the LIBOR (Interbank Offered Rate).” Fines of $530m (£366m) by the European Commission, £217m by the Financial Conduct Authority and $395m (£273m) and $274m (£189) from the US Justice Department the Federal Reserve respectively also counted towards its poor rating. So far the only other British bank to be rated by SE is Barclays, which was assigned an E rating, largely because of a similar set of scandals to RBS.

Filippo Cecchi, a director of SE told The National: “We just started issuing ratings to UK companies – Barclays and RBS are the first ones.

“We plan to launch the index by the end of summer 2016 and to do that we are going to rate the largest UK companies. We are also planning a European Banks Index, which is why we started with the two banks.”

The company said that according to various studies, sustainable companies were more able to identify new products and were more attractive for employees.

Therefore they managed to retain important know-how, foster innovation and strengthen their reputations, as well as reduce the potential impact of legislation and standards in their operating countries. Cecchi added: “We actually expect banks and companies of different industries and countries to comply with international indications on sustainability and corporate governance and therefore to get the highest ratings (EEE-/EEE).”

The firm said its ratings were intended to give an opinion on the level of compliance by companies and sovereign nations in the fields of sustainability and corporate social responsibility. on the basis of documents and guidelines published by the United Nations (UN) the Organisation for Economic Cooperation and Development (OECD) and the European Union (EU). RBS did not respond to a request for comment.