RBS destroyed customers’ businesses for profit and rewarded staff who targeted struggling firms, leaked files suggest
This is Money, 10.10.16
- Leaked files show RBS staff targeted struggling business customers
- It bought assets cheaply in financial crisis and crippled firms, files claim
- Lawrence Tomlinson issued report on RBS and small businesses in 2013
The Royal Bank of Scotland has come under increased scrutiny today after leaked files emerged that indicate it deliberately destroyed customers’ businesses in order to boost profits.
New documents show a project, labelled by one executive in an email as a ‘dash for cash’, crippled firms as it dangled hefty bonuses to staff who targeted firms to be ‘restructured.’
RBS, which was bailed out in the financial crisis by taxpayers, allegedly destroyed thousands of businesses during the crisis to boost profits, according to the secret documents obtained by BuzzFeed News and the BBC.
Tonight, further details are expected to emerge as the BBC focuses a segment of its 10.30pm show Newsnight on the bombshell claims.
It is believed that RBS bought assets at rock-bottom prices when firms hit difficulties in the economic turmoil which erupted in 2007 to then flog for a profit.
Staff were encouraged to target struggling companies and levy them with harsh fees. It meant many went bust while it boosted its own balance sheet.
The documents support previous allegations made by now government business adviser Lawrence Tomlinson in 2013.
The millionaire businessman was tasked with writing a report for the Government.
He concluded that RBS deliberately destroyed viable businesses and used their financial turmoil as a way to hoover up assets cheaply.
In the aftermath of that report, it is believed that RBS was considering legal action over the claims.
RBS customers have accused it for years of changing borrowing limits based on unrealistically low valuations of their business.
Subsequently, many breached lending thresholds.
It meant RBS then forced them into the hands of its so-called Global Restructuring Group.
GRG would then apply higher interest rates and pressured customers to sell assets in order to repay loans, took equity stakes in businesses and pushed them into administration – all claims also made by Lawrence Tomlinson.
GRG was wound-down by RBS in 2014, a year after the report.
Roughly 16,000 businesses are said to have been put into GRG after the credit crunch, with loans issued by the unit increasing by a whopping 500 per cent to £65billion between 2007 and 2012.
This allowed GRG to rack up healthy profits of £1.2billion in 2011.
Many of the owners affected have stepped forward to say they suffered mental and physical health problems as a result of their treatment by the bank.
An RBS spokesperson told Mail Online: ‘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 small and medium-sized business customers down.
‘We have already acknowledged that, in some areas, we could, and should, have done better for SME customers.
‘Specifically, we could have managed the transition to GRG better and we could have better explained to customers any changes to the prices or fees we were charging. We also did not always handle customer complaints well.
‘These were incredibly difficult times for the bank and the wider economy. Between 2008 – 2013, RBS lost more than £2billion from lending to SME customers. The bank itself was in a precarious position and required extensive Government support.
‘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.’
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: ‘The evidence now looks pretty damning against RBS, yet the irony is the taxpayer is going to end up carrying most of the can for any misconduct costs, as the Exchequer still owns around three quarters of the bank.
‘RBS is already potentially facing a multi-billion dollar fine in the US for mis-selling in the run up to the credit crunch.
‘These latest revelations suggest the financial crisis may not have brought an end to bad behaviour at the bank however, which looks to have continued while under government ownership.
‘The financial watchdog will give its verdict on the allegations facing RBS in due course, which could lead to yet another fine, and the prospect of a fresh wave of litigation.
‘It’s a sad fact that despite the spectre of the PPI scandal beginning to fade away, conduct costs remain a material threat to the Royal Bank of Scotland.
‘The prospect of further ongoing conduct costs, combined with the delayed separation of Williams and Glyn, and a seriously depressed share price, all mean the prospect of the bank leaving government hands remains a distant prospect, if the taxpayer is ever to recoup the money from its £45billion bailout.’
RBS shares are down nearly two per cent by mid-afternoon trading today.
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