RBS held to account

Sunday Times, 16.10.16

 

There isn’t much to add to what has been said about the latest revelations concerning Royal Bank of Scotland and its Global Restructuring Group (GRG). There’s no doubt some small businesses in hock to the bank were hopeless cases. But the revelations from the BBC and BuzzFeed confirm conflicts of interest were hidden from business customers.

 

RBS’s insistence that GRG was “not a profit centre” also sits ill with leaked documents showing managers encouraged staff to boost their bonuses by forcing struggling businesses into loan restructuring, where the bank could ratchet up fees, or seize their assets, to boost its bottom line.

 

RBS, which is 73% owned by the taxpayer, insisted it had “seen nothing to support allegations that the bank artificially distressed otherwise viable SME businesses or deliberately caused them to fail”.

 

It added: “We have found no evidence that the bank either inappropriately targeted such businesses to transfer them to GRG or drove them to insolvency.”

 

The number of companies rushing to join what is currently a £1bn legal action to be launched by RGL Management, a group formed to pursue claims against RBS and GRG, is increasing at a rate of knots. They have no faith in the Financial Conduct Authority’s much-delayed report into GRG’s activities and are determined to have their day in court.

 

The last time I spoke to RBS chief executive Ross McEwan, almost a year ago, he maintained the claims against GRG were “the most damaging” the bank faces. That’s quite an assertion considering RBS is facing settlements that will be measured in billions for mis-selling mortgage-backed securities in the US and a £4bn-plus legal action in the UK over its 2008 rights issue.

 

But you can see his point. RBS has offloaded about £1 trillion worth of assets in its desperate transformation from global behemoth to domestic business lender. Now, the type of customers RBS desperately needs to attract are queuing up to sue. Fred Goodwin’s legacy is bad enough, but the allegations against GRG threaten even the bank’s humble, downsized future.