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“Dash for Cash” by Royal Bank of Scotland’s GRG – the next big banking scandal?

10 October 2016 | Richard Gore

Leaked documents have shown that Royal Bank of Scotland’s Global Restructuring Group (GRG) secretly tried to profit from ailing businesses by purchasing assets from them “on the cheap”, despite claiming to be helping them.

The confidential files show the extent of the bank’s efforts to make money out of failing businesses. More than 12,000 companies were pushed into the bank’s GRG following the financial crash in 2008.

RBS staff were rewarded with increased bonuses for finding businesses which could have their debts “restructured”. The bank would then cut the size of customers’ loans or bump up their interest rates and fees, forcing customers to sell assets. In some cases, the bank took an equity stake in the business or pushed the business into administration.

For customers not in default, staff were encouraged to find a way to “provoke a default”, by using unrealistically low business valuations.

According to the leaked documents:

  • between 2007 and 2012, the value of loans to customers in the GRG increased five times over to more than £65bn;
  • GRG was “a major contributor to the bank’s bottom line”;
  • In 2011, GRG returned a profit of £1.2bn

The BBC reports that many of the small business owners affected have “not only lost their businesses but also experienced family break-ups and deteriorating physical and mental health due to the stress of their treatment at the hands of the bank. Others have been made homeless or bankrupted”. 

One customer, who borrowed £1.3m from RBS in 2008 for a property development project, has reported to the media that the bank insisted as a condition of his borrowing that he purchased a product which was meant to protect against rising interest rates. However, when interest rates fell, cash was being drained from the business as a result of this mis-sold product. The bank subsequently undertook a new valuation on the property. The customer was informed by RBS that the property was now worth too little compared to his loan. His company was transferred into GRG where it faced higher interest, fees and threats to pull the plug. The customer lost his business, his home and his marriage.

RBS maintains that “GRG’s role was to protect the bank’s position…In the aftermath of the financial crisis we did not always meet our own high standards and we let some of our SME customers down. Since that time, RBS has become a different bank…including how we deal with customers in financial distress”. The bank denies that it “artificially distressed otherwise viable SME businesses or deliberately caused them to fail”.

GRG Action

If your business was transferred to RBS’ Global Restructuring Group, you may have a claim. We specialise in financial services disputes and can review your case for a fixed fee. If you think you may have a claim please contact Lucy Mills

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.

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