Papers filed to court

Bank ‘ignored advice’ over cash call, alleges lawsuit

RBS hqRoyal Bank of Scotland executives rejected warnings about its financial situation just hours before it launched a £12 billion cash call in 2008, according to newly-filed documents.

Auditor Deloitte and investment bank Goldman Sachs questioned whether the financial details were potentially misleading for investors, court papers have alleged.

They expressed concerns that some figures in the prospectus for the rights issue were vulnerable to misinterpretation, giving the impression that RBS was in a stronger position to withstand losses.

The allegations are based on late-night emails seen by the Reuters news agency and form part of a series of warnings from outside advisers that senior RBS executives ignored as they prepared to bid for the Dutch bank ABN Amro.

In one email, sent the day before the rights issue was launched, a Deloitte partner is said to have warned the bank’s executives that it had not estimated full-year losses and risked breaking accounting rules.

RBS has denied that it misled investors and is vigorously defending its actions. Court documents for the defence, also seen by Reuters, say the valuation figures were reasonable and composed to help the bank decide an appropriate size for its cash call, not to guide investors on losses on the bank’s assets.

In the defence documents, lawyers for RBS say the figures were not misleading but reasonable estimates made for capital planning purposes, based on what the board considered to be prudent assumptions in view of credit market conditions.

RBS, Goldman Sachs and Deloitte declined to comment.

Shareholders who invested in the rights issue are suing the bank for £4bn after losing most of their money when the bank had to be bailed out later that year.


The case, scheduled to start in March, is expected to last six months.

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