By the early afternoon, RBS’ share price had stabilised to 179.3p.
The confidential files, handed over to BBC Newsnight and BuzzFeed News Monday morning by a whistleblower, relay details of RBS’ ‘dash for cash’ initiative, under which businesses were pushed into its global restructuring group (GRG) only to be hit with excessive fees and interest rates.
Employees were incentivised to usher businesses into the bank’s GRG unit and were awarded higher bonuses based on fees collected for restructuring customer debt by slicing loans or collecting assets, the documents confirm.
The GRG came under fire three years ago when government adviser Lawrence Tomlinson released a report, accusing RBS’ restructuring division of being driven by profit instead of assisting distressed small to medium enterprises.
An FCA investigation sparked by Tomlinson’s findings is still currently underway.
Within the confidential documents, the controversial restructuring unit is referred to as “a major contributor to the group’s bottom line”, despite protestations from RBS to MPs in 2014 that GRG was “not a profit centre.”
And the leaked documents merely reinforce this point, showing GRG returning a £1.2bn profit in 2011.
One of the central thrusts of Tomlinson’s argument is the conflict of interest between the GRG and West Register, the bank’s property arm.
Derek Sach who was the global head of GRG was also simultaneously on the property acquisition committee of West Register that signed off the bank’s bids for distressed assets.
The leaked files reinforced that, contrary to RBS’ claims, the property division was privy to information that was unavailable to other bidders when acquiring property from GRG.
West Register accumulated £3.3bn in assets during the financial crisis, according to the leaked information.
In a statement today, Tomlinson commented: “For me, the biggest part of the scandal is what RBS told the businesses about the purpose of GRG, compared to what actually would happen to them in that unit of the bank – the lack of transparency is astounding.
“All businesses affected by GRG deserve an immediate apology from the bank whilst the FCA considers how a compensation scheme should be structured.
“The FCA should also consider how this behaviour was enabled by the conflicts of interest in the professional services industry.”
“The evidence now looks pretty damning against Royal Bank of Scotland, yet the irony is the taxpayer is going to end up carrying most of the can for any misconduct costs, as the exchequer still owns around three quarters of the bank,” said Laith Khalaf, senior analyst at Hargreaves Lansdown.
Coupled with the multi-billion dollar fine its private banking arm Coutts & Co is likely to pay for mis-selling products in the US before the credit crisis, these revelations spell bleak prospects for the British bank, said Khalaf.
“The financial watchdog will give its verdict on the allegations facing RBS in due course, which could lead to yet another fine, and the prospect of a fresh wave of litigation,” he said.
“It’s a sad fact that despite the spectre of the PPI scandal beginning to fade away, conduct costs remain a material threat to the Royal Bank of Scotland.
“The prospect of further ongoing conduct costs, combined with the delayed separation of Williams and Glyn, and a seriously depressed share price, all mean the prospect of the bank leaving government hands remains a distant prospect, if the taxpayer is ever to recoup the money from its £45bn bailout,” he added.
