'Just Hit Budget!' bankers at RBS restructuring unit told during crisis - memo

LONDON (Reuters) - Royal Bank of Scotland staff helping small firms to restructure debt during the financial crisis were given a list of ways to squeeze more money from struggling clients and told to "Just Hit Budget!", a memo released on Wednesday showed.

The release of the 2008 document by the British Parliament's Treasury Select Committee (TSC) comes ahead of a debate by lawmakers on Thursday on the treatment of small business customers by the bank's Global Restructuring Group (GRG).

State-owned RBS has acknowledged some bad practice at the unit and set aside 400 million pounds ($555 million) to cover the bill for claims against it.

Among pointers to staff from a junior manager, who RBS Chief Executive Ross McEwan told the TSC had since left the company, was one telling them: "Rope: Sometimes you just have to let customers hang themselves. You have then gained their trust and they know what's coming when they fail to deliver."

The memo's release comes just days after British outsourcer Carillion , was forced into bankruptcy after failing to agree a debt deal with lenders including RBS, which court documents showed had demanded even tougher terms before the collapse.

McEwan, in a written response to TSC Chairman Nicky Morgan, said the memo was never part of RBS's policy and had only ever been circulated within one regional office, as well as two GRG offices.

"For the avoidance of doubt, the language used in the document was completely unacceptable and the bank does not condone it," McEwan wrote.

In October, Britain's financial watchdog told RBS to speed up its handling of compensation claims related to GRG, which has been accused by customers of driving them to bankruptcy in order to pick up their assets on the cheap.

($1 = 0.7203 pounds)

(Reporting by Simon Jessop and Emma Rumney; Editing by Mark Potter)