Written by: Keith Tully
Published: 10th October 2016
A swathe of newly-leaked documents appear to illustrate how the Royal Bank of Scotland (RBS) systematically squeezed struggling businesses in order to boost its own revenues and profits.
The documents have been obtained by the BBC’s Newsnight programme and the website BuzzFeed, with the evidence seeming to show that RBS did a great deal of damage to thousands of SMEs in its pursuit of income via its Global Restructuring Group (GRG).
Thousands of secret RBS documents were released via the leak with many of them appearing to detail exactly how the bank’s GRG, rather than helping struggling businesses, deliberately ran down these companies, reduced the scale of their loans and bought up their assets at heavily discounted rates to make profits.
RBS has faced accusations in recent years of engaging in practices that effectively damaged or destroyed potentially healthy businesses for profits in the wake of the financial crisis of 2008.
These accusations led to the bank paying the law firm Clifford Chance to carry out an “independent” investigation into the matter with a resulting report concluding that there was “no evidence” that those claims were accurate.
However, faced with the evidence from the newly-leaked tranche of documents, RBS has conceded that its GRG may not always have functioned properly.
“In the aftermath of the financial crisis we did not always meet our own high standards and let some of our SME customers down,” a statement from the bank has said.
The bank though continues to deny that it “targeted businesses to transfer them to GRG or drove them to insolvency”.
In the wake of the financial crisis, as many as 12,000 companies were engaged by RBS’s GRG, which was supposed to function as a turnaround division.
The documents leaked to Newsnight and BuzzFeed include emails that appear to outline the GRG’s strategy of deliberately searching for companies that might be “restructured” in ways that were positive in revenue terms for the bank but potentially disastrous for the businesses involved and their owners.
One RBS executive refers to these efforts as “Project Dash for Cash”, with staff apparently being incentivised to pressure SME customers into selling assets to pay down loans or to sell equity stakes in their businesses to RBS.
RBS claims to have “become a different bank” and to have introduced “significant structural and cultural changes” since the period between 2007 and 2012 during which its “turnaround” division’s activities are now coming under close scrutiny.