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A settlement will not erase anger of 2008

Terry smiling headAfter waiting the best part of a decade shareholders in Royal Bank of Scotland believed they would finally hear the truth about the deal that cost them a fortune.

It now looks likely that those secrets will remain on the file as the bank and the groups representing shareholders who claim they were misled in the 2008 rights issue edge towards a settlement.

The out-of-pocket investors will get some of their money back, but they will never know how much the board knew before it asked them to cough up £12 billion just months before the bank had to be rescued by the taxpayer.

It all looked so rosy when Fred Goodwin unveiled Europe’s biggest issue of shares in April of that year. RBS was riding high as the biggest bank in the world by value and had just pulled off a three-way deal to buy the Dutch bank ABN Amro. What was less well known at the time was that ABN was in sub-prime [low grade mortgages]. Loads of it, as things turned out, and RBS was heading for trouble.

But with assurances that RBS was in good shape, more than 95% of the shares offered at a discounted price of 200p per share were taken up by investors.

A week before the issue closed in June RBS announced that the trading guidance it had given at the time of the rights issue was appropriate for the group and its divisions.

However, some big investors were already beginning to show nervousness over the bank’s determination to win ABN Amro despite worsening market conditions which were said to have necessitated the rights issue.

When the bubble burst, thousands of private shareholders saw their savings vanish and they have spent the intervening years fighting their claim. Many have died while they waited for the case to come to court.

The bank has denied any wrongdoing and has reached agreement with most of the claimants. Its legal team now has a week to convince the remaining 9,000 to end their fight and accept the revised terms on offer.

The investors will get a slice of their money back, but the former executives, who included chairman Sir Tom McKillop and former investment bank boss Johnny Cameron, will avoid further public examination.

However, they will not avoid a continued suspicion hanging over them.

For RBS, a settlement would go a long way to removing one of the outstanding legacy issues that continue to weigh on its prospects for recovery. It is no wonder the shares edged up on the prospects of a deal with shareholders.

An out of court settlement would, of course, result in much of what the claimants set out to achieve, but some of those shareholders refusing to accept the terms want to see the former board members in court.

They are less interested in the compensation, more in forcing those who ran the bank to face the music and explain what really happened behind closed doors.


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