RBS purposefully caused SMEs to default » SMEInsider

RBS purposefully caused SMEs to default

The Royal Bank of Scotland’s global restructuring group (GRG) stripped down companies in order to improve RBS’s capital position, according to an investigation from a national newspaper.

The national newspaper states that the purpose of GRG was to help ailing businesses in terms of minimising losses, business restructuring and ultimate return to profitability. Instead, The Times revealed that the bank “ trained hundreds of frontline GRG staff in how to assess the small and mid-sized companies they were restructuring in terms of their impact on the bank’s capital ratio.”

The SMEs were then ‘‘subjected to excessive fees and charges and to questionable revaluations of the assets their loans were secured against,” causing many businesses to fail.’’

Banks have to ensure they have enough capital to absorb any potential losses they may incur when they lend. Businesses that are smaller require more capital because they are higher risk, and according to The Times, this was the incentive for RBS to expedite the removal of high risk assets. The newspaper states this practice would allow the bank to pass stress tests and improve its capital position.

The Times also revealed that the Serious Fraud Office is observing the events unfolding at GRG.

Following the reckless lending leading up to the ­financial crisis, many of our customers and their businesses ended up in serious financial difficulty. GRG helped minimise losses where it could and successfully restructured a significant number of businesses it worked with, advancing over £100 million of new lending and safeguarding hundreds of thousands of jobs,” a RBS spokesman told The Times.

  • Gary Pettit

    We all know bad news sells newspapers and while I have not read the article or seen their research this has to be put into context.
    As an insolvency practitioner I have found myself dealing with GRG regularly. In a clear majority of those cases I was able to have “Adult” communications where commercial decisions were reached for the benefit off all concerned. Unfortunately, GRG were normally used for the higher risk or high profile cases so it is understandable any decision they make will come under the spotlight. With this in mind, yes, I have had decisions from GRG that were not right (in my opinion) but, again, must emphasise that was in the minority of cases.
    If the media want to look into something why not into the demand by the banks that their select panel firms are used to deal with cases. All IPs carry the identical qualification and it is often the case directors have built a rapour only for the bank to demand a stranger from a larger practice is appointed and the costs are invariably far higher, resulting in reduced dividends to creditors. Naturally, it is horses for courses and a small practice should not think it can handle (say) the administration of Woolworths but many times the debtor is a company in a single trading unit and is easily managed by a smaller firm with small firm cost.

    • Investigating Accountant

      as for GRG – an independent and thorough investigation is clearly required but on the bank panel monopoly, you are spot on in my view – read online Chris Blackhurst in the London Evening Standard last week on the subject of the “insolvency club” and the an “insolvency ombudsman”

  • Andrea Willows

    I am one of Natwests victims who was moved over to grg and because I would not sign agreements with extortionate fees Natwest/RBS called in the receivers. I never missed any of my quarterly repayments and was never in arrears. It was purely because Natwest would not renew a loan facility that they had previously said they would. My case was nothing to do with interest rates swaps. I am trying to find others like myself.

  • Gary Pettit

    I am sorry to hear that Andrea,

    Obviously, I cannot discuss specific cases but as I mentioned in my original comments there have been times when the bank chose a different route to that I suggested/advised. Naturally I am going to disagree with GRG on those cases but those were invariably the cases GRG then referred to one of their panel firms.

    I have handled cases with similar issues as you describe and it has been a case of trying to secure re-finance with an alternative financier, not always with success unfortunately.

    • Andrea Willows

      Thank you for your reply, is there a way I can contact you to discuss further?