RBS, accused of having sabotaged its clients, to acquire their assets

Royal Bank of Scotland (RBS) is accused of having put viable companies in difficult situations, so it can buy up their assets at paltry prices, according to reports quoted by Financial Times (FT) and Bloomberg.

Lawrence Tomlinson, advisor to the state secretary of the British government for the business sector, Vince Cable, says that the lender is guilty of "systematically abusing" corporate clients, from the moment of its rescue by the government, in 2008, the two publications also show.

The criticism of the advisor has focused on the restructuring division of RBS, Global Restructuring Group (GRG), which the distressed companies were "pushed" towards, the quoted sources say. Once transferred there, they were charged high fees, and some of the bank's devalued assets were taken over by the real estate division of the bank, the report of Lawrence Tomlinson states. The document also notes that the profits obtained from the lending activity were "very small, compared to the profit targets which bankers are incentivized to reach", according to Bloomberg.

"There are many devastating stories about the way in which RBS has destroyed good businesses and the impact that this had on the lives of business owners", says Lawrence Tomlinson, in a statement sent to the publication. The report is asking the authorities to conduct additional investigations.

Vince Cable, who described the accusations made in the report as "very serious" and said he was "horrified" by the findings of his advisor, said that he sent the document to the Financial Conduct Authority and the Prudential Regulatory Authority, in charge of the oversight and the regulation of the British financial market, according to FT and Bloomberg.

The Minister of Finance of the UK, George Osborne, said the information which has surfaced was "shocking", according to sources in the press.

"We are trying to actively seek out these problems, not to < sweep them under the rug >", he said.

The representatives of RBS said that they are trying to reduce the risk of some of the commercial loans extended, in order to make the bank "safe and powerful" again, and that it is already conducting an investigation concerning the treatment applied to clients, the two publications write.

"GRG is successful in restructuring most of the companies it works with, but in each case, it works with the customers which are facing heavy stress in their lives", they said. They added that not all companies facing "serious" financial problems can be saved, Bloomberg says.

Andre Spicer, a professor at Cass Business School, of London, considers that it is not "entirely clear" how Lawrence Tomlinson reached the conclusions in the report. "It appears he mainly focused on informants who would give him horror stories. This means the sample is probably biased toward less than positive findings", the professor explains.

Lawrence Tomlinson, the advisor to the state secretary said, speaking on BBC, that RBS needs to fix the problems described in his report. "Even if my report were completely wrong, this shows the people's perception of RBS. Small companies feel that there are harmful practices within the bank". He expressed his "disgust" at the manner in which some "flourishing businesses" were treated by the employees of RBS, according to Bloomberg.

• The secretary of state for the business sector in the UK: "RBS' behavior had negative effects on the economy"

Vince Cable said he is aware of the complaints of small companies concerning the manner in which they have been treated by banks, in general, and by RBS, in particular. "This had a negative impact on the British economy, which we are still trying to recover from. I am however confident that the new management of RBS is aware of this history and it is determined to turn the bank into one that will support the growth of small and medium enterprises", the secretary of state for the business sector said, according to the British press.

Vince Cable has also expressed in the past concerns about the access to financing of small and medium enterprises. In 2010 he called bankers "smugglers and gamblers", Bloomberg says.

If the report results in requests for settlement addressed to RBS, this could postpone the approach of the British Ministry of Finance to recoup 45.5 billion GBP which it injected in the bank, as part of the biggest bail-out of a bank using taxpayer money in history, the publication.

A second report, drawn up by the former deputy governor of the Bank of England together with consulting firm Oliver Wyman, states that RBS must revise its lending practices and investigate the manner in which distressed customers were treated, media sources report.

The bank must also set a number of goal concerning the granting of loans, with clear responsibilities concerning their meeting, according to the document, which also recommends increasing the level of training of the employees, counteracting risk aversion and improving communication with the clients.

The new executive director of RBS, Ross McEwan, promised that he would learn the lessons presented in that report, which was commissioned by the bank, and said that a new plan for the relationship with customers will be announced in February next year.

The British government holds 81% of Royal Bank of Scotland, after receiving an aid of 45.5 billion pounds in 2008.

Ross McEwan took over the management of RBS in the beginning of last month, replacing Stephen Hester, who resigned at the request of the Board of Directors.

The authorities in London are reviewing several options for selling its stake in RBS. According to the press, one of them would consist of dividing it into a "healthy" bank and one that would manage the "toxic" assets. The Ministry of Finance has selected investment bank BlackRock as a consultant for the split.

In the beginning of September, RBS România has turned into a branch of the parent-bank in Great Britain. Its new official bank is The Royal Bank of Scotland plc, Edinburgh, the Romanian branch. Previously, it was a branch of RBS NV from Holland, being a Romanian legal entity, with deposits below 100,000 Euros guaranteed by the Fund for the Guarantee of Deposits in the Banking System (FGDB).

In April, RBS Romania sold its retail portfolio to UniCredit Ţiriac Bank and UniCredit Consumer Financing, in a deal which comprised assets worth 315 million Euros and liabilities of 230 million Euros. The transfer of the portfolio was completed at the end of September.