RBS and GRG – James Hurley of The Times continues the story

Guto was heavily involved in trying to resolve the scandal of Interest Rate Swop Mis-selling, founding an APPG on that subject which has now become the APPG for Fair Banking.  Redress for mis sold swaps was found for thousands of small businesses but many others have still not been satisfactorily compensated.  During the course of that work GRG (an arm of RBS) kept coming up, as did the name West Register.  It was felt by Ordinary People in Business (Bully Banks) that the government had a “hand” in the matter. James Hurley – who has been an incredible investigative reporter has continued his work in this field and we reproduce below in full his article in The Times of January 30th 2019.  Please share this story as widely as you can – so many families, hardworking business people have suffered hugely from these practices.  Some will never recover. 

 

The government had “day-to-day” involvement and “strategic” control over the treatment of companies in the hands of Royal Bank of Scotland’s scandal-hit restructuring division, according to allegations in a legal claim against the bank.

Court papers reveal that Oliver Morley, a wealthy property developer who is suing RBS, is also considering taking legal action against the Treasury over its alleged role in influencing the aggressive tactics employed against businesses by the bank’s Global Restructuring Group (GRG).

Mr Morley claims that GRG placed him under “economic duress” which resulted in the acquisition of some of his assets by the bank’s property division, West Register, in 2010.

Documents that have come to light in the £100 million High Court action suggest that the government’s now disbanded Asset Protection Agency, which insured RBS’s toxic loans, played a key role.

Emails appear to show the close and detailed involvement of agency officials in how RBS managed Mr Morley, with officials instructing the bank to resist a rescue deal that the property entrepreneur was trying to arrange. The agency’s preference was for the bank’s own property division to acquire Mr Morley’s assets, internal emails show.

In his witness statement, Mr Morley said he was “appalled” by how the agency “appears to have encouraged the bank towards the path of what was effectively a sale to itself of a properly performing portfolio of properties”. The Treasury is not a party to the court action but Mr Morley has put the government on notice that he is considering suing it.

The court case is likely to bring fresh scrutiny to the intrigue surrounding the role the government played in the GRG scandal. The unit was ostensibly a “turnaround” unit designed to help ailing businesses. An investigation commissioned by the Financial Conduct Authority found that GRG had in fact focused on extracting money from thousands of businesses, many of which blame it for damaging their livelihoods. The bank later set up a contentious compensation scheme.

The Treasury created the agency in 2009 and oversaw until it was wound up in 2012. The unit was effectively a giant state insurance scheme to underwrite bad assets.

The agency covered about 60 per cent of the assets within GRG, including small and medium-sized companies, and the bank was contractually obliged to follow its rules, which made forbearance on customers less important than maximising recoveries.

An RBS source indicated the bank still focused on returning “customers to satisfactory wherever practicable” and that the lender had resisted pressure from the agency on a number of occasions as it sought to support customers.

Mr Morley, who claims he “suffered significant losses” at the hands of RBS is demanding that an agreement that led to the sale of his properties to West Register be overturned. He is also seeking damages for “intimidation” and “breach of contract”.

RBS said it “fundamentally disagrees with Mr Morley’s claims and does not believe they have any merit”. A spokesman said that it would contest the allegations vigorously in court, adding that RBS incurred losses of about £30 million on the money it lent to Mr Morley.

Mr Morley claims in his witness statement that the agency “dictated” to RBS that a rescue deal he was hoping to line up with HSBC should be rejected and a purchase of his assets by West Register should instead proceed.

Internal emails show an RBS banker at one point describing the agency’s resistance to the refinancing option as “certainly their craziest decision yet”.

Court documents show that in 2010, Laura Barlow, a GRG executive, asked colleagues to write a letter to the agency, to be reviewed by Derek Sach, the GRG boss, to “put on record the impact of their process on our normal commercial negotiations and implementation of our strategy”.

Mr Morley claims the agency was “in charge not just of the overall strategy of RBS GRG but also of decision-making on a day-to-day basis”, the documents show. He also claims the Treasury’s response to his pre-action letter to them suggested “they appear to be adopting the position that the APS [asset protection scheme] could be properly be operated on the basis that the bank had to subordinate good practice to its will”.

Behind the story
For some, the idea that the government has to share blame for RBS’s mistreatment of thousands of companies is one for the conspiracy theorists (James Hurley writes).

However, a careful reading of what is already in the public domain at the Asset Protection Agency, the division of the Treasury that insured RBS’s toxic loans, does raise awkward questions. The bank may have escaped formal action over the activities of its Global Restructuring Group, but in the court of public opinion it has been tarred and feathered for the unit’s aggressive handling of small and medium-sized companies.

What if at least some of that conduct took place under significant duress from the government? It’s not as fanciful as it sounds. The agency covered about 60 per cent, or £40 billion worth, of the debt in GRG, including a significant (and possibly higher) proportion of loans to small and medium-sized companies.

In an overlooked aspect of his exchange with the treasury committee in 2014, Derek Sach, the architect of GRG, said it was “absolutely right” that it could be in the bank’s interests to destroy a customer to improve its balance sheet.

Mr Sach said that the agency was “always pushing us to go for more foreclosure for exactly that reason” but he had “robustly resisted” this pressure. Yet the agency’s own documents call into question to what extent GRG could resist. For assets it covered, the bank needed the agency’s permission to release security, sell or transfer assets or amend, replace or terminate any hedging products tied to a loan.

There was an expectation that RBS would treat customers in a way “consistent with good industry practice” but this was ultimately subordinate to agency objectives, according to its annual reports.

RBS is understood to believe the outcome was fair and proper. In 2010, Mr Morley repaid some debt in return for keeping a portion of his portfolio.

A Treasury spokesman said the government would not comment on litigation to which it was not a party.

 

James Hurley – The Times.  30th January 2019