MPs could re-open RBS probe as leaks reveal ‘dash for cash’ in 2008
The Telegraph, 10.10.16
Royal Bank of Scotland could face a fresh investigation from MPs as a new cache of leaked documents has shed more light on allegations that the bank ripped off small businesses during the financial crisis.
RBS’s global restructuring group (GRG) has been accused several times of artificially forcing companies into financial distress, enabling the bank to strip them of property and other assets.
Internal documents from the bank, published by the BBC and Buzzfeed, detail some of the discussions that took place in RBS at the time, giving a picture of a bank that was itself in financial distress and needed to squeeze more money from customers.
At Treasury Select Committee hearings in 2014, RBS executives insisted that the GRG was not a profit centre, contradicting findings from a review by former Bank of England deputy governor Sir Andrew Large.
Later, the bank wrote to the committee to correct this, admitting that the GRG was a profit centre.
The leaked documents include more details on the scale of earnings recorded in the unit, showing that it made almost £1.2bn in net profit in 2011, the peak year.
As a result, MPs are now considering re-opening the case.
“What was uncovered in these documents does not match what they said to us,” said Conservative MP Steve Baker.
“The impression I get is that we were badly misled and we cannot have Government being misled on an issue which is of utmost importance to the economy and people’s trust in banking.”
Regulators are currently investigating claims that small companies were mistreated by the bank and forced to shut down.
Elsewhere in the leaked documents, one senior executive writes to colleagues in the run-up to the financial crisis to tell them that RBS was engaged in “Project ‘dash for cash’”.
Rhydian Davies, the then-head of property in the south region for RBS’s corporate banking division – which typically served larger companies – explained in the November 2008 letter that the bank was in financial difficulty and needed to find more funds, including from customers.
The letter asks staff to look for companies that have breached the terms of their loans, or would breach them if properties were revalued at lower levels, or if they needed other financial support. These could then be used as opportunities to restructure loans and charge extra fees, the letter said.
Banks can restructure loans when a company gets into financial difficulty, typically when it makes sustained losses, misses loan repayments or the value of its assets falls sharply.
Other papers in the cache of internal RBS documents, however, show that small businesses could be moved into the GRG for reasons other than financial distress – for example, if they took legal action against the bank, or if they tried to move to a rival lender.
RBS has also been accused of focusing more on taking property from small firms to sell on for a profit itself, rather than helping the companies out of their financial predicament.
A report compiled by businessman and then-government adviser Lawrence Tomlinson in 2013 detailed a series of allegations showing what he called “disturbing patterns of behaviour” by RBS towards its small business customers.
RBS then hired lawyers from Clifford Chance to review the business, who found “no evidence” to back up the claims.
The Financial Conduct Authority is currently reviewing a new report from consultants Promontory Financial Group and Mazars. The City regulator said this month that “a number of steps” are still required before it can publish its final findings on the allegations.
“The leaks today illustrate the need for the FCA to get on with publication as soon as possible. I will be writing to the FCA for a publication date,” said Andrew Tyrie, the chairman of the Treasury Select Committee.
“On the basis of what has come out so far, this appears to be a shocking story, with many businesses at the wrong end of it, and who deserved better. The longer the delay in publication, the longer that many small firms may have to wait to receive any compensation.”
RBS is also fighting several legal cases against businesses that have made a range of claims against the bank, including that their assets were improperly valued and that RBS acted in a bullying manner as itsought to put the companies out of business.
“RBS has been very clear that GRG’s role was to protect the bank’s position, where possible by working with distressed businesses to return them to financial health. In the aftermath of the financial crisis we did not always meet our own high standards and we let some of our SME customers down,” said Jon Pain, RBS’s chief conduct and regulatory affairs officer.
“Despite a number of investigations that involved a detailed review of all the evidence, including reviewing millions of pages of documents, we have seen nothing to support the allegations that the bank artificially distressed otherwise viable SME businesses or deliberately caused them to fail.
“In regard to the wider allegations raised, we have found no evidence that the bank either inappropriately targeted such businesses to transfer them to GRG or drove them to insolvency. Nor did it buy their assets at a lower than market price.”
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