Shocking revelations over tactics
RBS ‘pressured customers’ according to leaked files
The bank bought up assets cheaply from failing businesses it claimed to be helping, the confidential files state.
Staff could boost their bonuses by finding firms which could be squeezed in what it called a “dash for cash”.
RBS said it had let some small business customers down in the past but denied it deliberately caused them to fail.
The documents add further pressure on RBS over allegations about its turnaround division, Global Restructuring Group.
It 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, Mr Tomlinson says they provide further ‘evidence’ of the allegations made in his report.
RBS commissioned the law firm, Clifford Chance, to report on Mr Tomlinson’s allegations in what it billed as an independent report.
The 2014 report said it had found no evidence to support most of his accusations – for example, that West Register – it property division – was deliberately targeting clients’ assets.
However, the documents show West Register was being passed information about properties held by customers transferred to GRG even before the companies had agreed to sell them.
They also contradict claims by RBS that most of the customers returned to normal banking after a spell in its turnaround division.
Senior RBS executives in charge of GRG, Derek Sach and Chris Sullivan, repeatedly claimed before MPs in 2014, in response to Mr Tomlinson’s allegations, that GRG was “not a profit centre”.
That denial was repeated before MPs 27 times, with executives claiming it was “totally inappropriate” to call it a profit centre.
The RBS chairman at the time, Sir Philip Hampton, subsequently accepted that it was a profit centre, saying there had been a “lack of clarity” but said it was “an honest mistake”.
In a statement issued this morning Mr Tomlinson 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 report from BuzzFeed News and BBC Newsnight on the RBS Files demonstrates that the perverse incentives I described in the Tomlinson Report did exist within GRG. There are unmistakable conflicts of interest between West Register and GRG.
“Most vitally, 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 over £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.”
Mr Tomlinson says there are “many questions for the bank and regulator to answer”, including:
- Why has RBS so vehemently denied the allegations of the Tomlinson Report when the bank was in possession of the evidence at the time?
- Why were RBS’ ‘independent’ reviewers, Clifford Chance, not given access to these documents ahead of the publication of their report?
- Was the FCA in possession of this information and, if so, why has it taken so long for the FCA report to be published?
“I trust the bank will now be retracting the statements it made about the Tomlinson Report. 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.
“RBS’ Chris Sullivan even went so far as to cancel my NatWest business and Coutts personal bank accounts the evening before he made misleading statements to the Treasury Select Committee in defence of GRG, despite knowing the contrary to be true.
“For me, the biggest part of the scandal is what RBS told the businesses about the purpose of GRG, compared to what actually would happen to them in that unit of the bank – the lack of transparency is astounding.
“This has all been enabled by a system pervaded by conflicts of interest of so called ‘independent’ parties. The purported neutrality of professional services utilised by GRG to provide ‘impartial’ verification of their decisions is called into doubt by the fact that almost 10% of the workforce in GRG was made up of secondees from these firms. Not to mention the role of West Register within GRG.
“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.”