BusinessBusiness RecoveryRBS pushed companies to collapse and reaped the benefits

RBS pushed companies to collapse and reaped the benefits

Bank referred to regulators for allegedly purposely defaulting companies into collapse so it can sell their assets for a profit

RBS pushed companies to collapse and reaped the benefits

NATIONALISED BANK RBS is pushing companies to collapse and selling the assets for its benefit, a report by a government adviser has alleged.

Lawrence Tomlinson has said the 81%-state-backed bank put some “good and viable” businesses into default so it could sell the assets to make a profit, the BBC reports.

The findings were given to business secretary Vince Cable who has passed it onto the Financial Conduct Authority and the Prudential Regulatory Authority.

Tomlinson’s report alleges companies were pushed towards the Global Restructuring Group (GRG) loans, through minor technical breaches such as late filing. GRG loans have higher interest rates and fees and in some cases cause companies to collapse allowing RBS to buy the property and assets cheaply.

The report claims GRG fees and rates can reach up to hundreds or thousands of pounds. It said one business paid £256,000 in fees while another dished out £40,000 just to be able to continue borrowing with the bank.

Tomlinson, who acted independently of the government, told the BBC there is a perception that small businesses are being “purposefully distressed” in order to get them into the GRG.

“I feel really sick sometimes. It is really disturbing,” he said, after conversations with affected businesses. “It is ruining people’s businesses for sure, and in some cases having a huge impact on their personal lives too, even leading to family breakdown.”

An RBS spokesperson said: “In the boom years leading up to the financial crisis, the over-heated property development market became a major threat to the UK economy. RBS did more than its fair share to fuel this and commercial property lending was one of the key drivers of our near collapse as valuations rapidly plummeted.

“Facing up to these mistakes has been a difficult, but essential part of making RBS a safe and strong bank once again. That has been one of GRG’s main tasks. GRG successfully turns around most of the businesses it works with, but in all cases is working with customers at a time of significant stress in their lives. Not all businesses that encounter serious financial trouble can be saved.”

The bank added it was committed to an inquiry to investigate how customers are treated by RBS. It is also reported by Sky News that RBS has called in law firm Clifford Chance to look at the allegations made by Tomlinson.

Business Secretary Vince Cable said: “Some of these allegations are very serious and I am waiting for an urgent response as to what actions have been taken.

“I am, however, confident that the new management of RBS is aware of this history and is determined to turn RBS into a bank that will support the growth of small and medium sized businesses,” he told Sky News.

Chancellor George Osborne told ITV’s Daybreak: “We are actively trying to seek out these problems, we are not trying to brush them under the carpet.

“We are trying to make sure the banks are working for small businesses, the banks are working for hard-working families.

The state-owned bank’s report into its own lending practices to small and medium sized companies by the former Bank of England deputy Governor Sir Andrew Large will also be published on Monday.

RBS’s new chief executive Ross McEwan has already said this report will make for uncomfortable reading, but promised to implement its findings in full.

 

Related Articles

RBS hires PwC to investigate GRG division

Accounting Firms RBS hires PwC to investigate GRG division

2y Richard Crump, Writer
IPs in a predicament over interest rate swap mis-selling

Business Recovery IPs in a predicament over interest rate swap mis-selling

3y Robin Henry
Deloitte partners take receivership of The Gherkin

Business Recovery Deloitte partners take receivership of The Gherkin

4y Kevin Reed, Writer
Lawyers mull Goodwin case over RBS accounting

Accounting Standards Lawyers mull Goodwin case over RBS accounting

6y Jaimie Kaffash, Writer
Lehman Brothers' administrators settle with Citigroup on $2.5bn

Business Recovery Lehman Brothers' administrators settle with Citigroup on $2.5bn

6y Rachael Singh, Writer
Zolfo's Freakley called in to help Stemcor

Business Recovery Zolfo's Freakley called in to help Stemcor

4y Kevin Reed, Writer
Barclays makes complaint to authorities about Baker Tilly

Business Recovery Barclays makes complaint to authorities about Baker Tilly

5y Rachael Singh, Writer
Where there's muck, there's brass

Business Recovery Where there's muck, there's brass

6y Taking Stock