RBS restructuring group ‘damaged thousands of viable businesses’, probe claims

AN investigation by BuzzFeed News and BBC Newsnight claims to show Royal Bank of Scotland’s turnaround division Global Restructuring Group “damaged thousands of viable businesses in pursuit of profits for the bank”.

The probe has brought to light thousands of previously unseen internal documents, which add further pressure to GRG, which has been under investigation by the Financial Conduct Authority since the publication of the Tomlinson Report in 2013 authored by the Government’s entrepreneur in residence at the time, Lawrence Tomlinson.

Responding to today’s revelations and having reviewed a selection of the RBS Files, Tomlinson has declared them ‘evidence’ of the allegations made in the Tomlinson Report.

He said: “The RBS Files show the Royal Bank of Scotland, and its executives, took the opportunity to make profit from businesses in distress whilst telling them that they were there to ‘help’.
 
“The Files show the excessiveness of fees and interest charged in GRG and unequivocally demonstrate the ‘value-added’ to the bank’s balance sheet through GRG’s work on risk-weighted assets.

“As a result, GRG has damaged thousands of viable businesses in the pursuit of profit for the bank.

“Three years ago, I called for an investigation into the behaviour of GRG.  Since then, we have been waiting for the results of the Financial Conduct Authority’s (FCA) review of this unit of the bank.
   
“Today’s demonstrates that the perverse incentives I described in the Tomlinson Report did exist within GRG.”

Tomlinson said that despite the protestations of the bank and statements of GRG’s executive team at the time, Derek Sach and Chris Sullivan, this division of the bank was not only a profit centre, it made more than £1.2bn of profit from interest and fees in 2011.  

“That is before accounting for the billions of pounds of ‘value-added’ to the balance sheet they boast of,” he said.
 
He went on to say there are many questions for the bank and regulator to answer including: Why RBS has so vehemently denied the allegations of the Tomlinson Report when the bank was in possession of the evidence at the time?

Tomlinson also wants to know why RBS’ ‘independent’ reviewers, Clifford Chance, not given access to the documents ahead of the publication of their report?

Also, were the FCA in possession of this information and if so, why has it taken so long for the FCA report to be published?
 
Tomlinson added: “It is a national disgrace that UK taxpayers, as majority shareholders in RBS, have been picking up the legal bill for all these reviews and investigations, when the bank could simply have held up its hands and put things right.

“All businesses affected by GRG deserve an immediate apology from the bank whilst the FCA considers how a compensation scheme should be structured. The FCA should also consider how this behaviour was enabled by the conflicts of interest in the professional services industry.”

A spokesperson from RBS was unavailable for comment this morning