‘Ransacked’: Expert slams UK Treasury involvement in asset-stripping RBS customers

Ben Wray

Evidence emerges UK Government Asset Protection Agency pushed RBS outfit to take aggressive measures against small and medium businesses

  • The Royal Bank of Scotland’s Global Restructuring Group was supposed to help businesses struggling to manage RBS debts, but instead it helped thousands into liquidation.
  • Evidence has emerged that a UK Government agency played a more involved role in this behaviour than previously understood.
  • Court papers claim the government agency pressed for even more aggressive measures than the bank.
  • Experts and politicians are calling for wholsesale reform of the banking sector to end destructive practices.

EXPERTS and Scottish politicians have slammed a UK Government agency after evidence emerged about it’s intimate involvement with the Royal Bank of Scotland’s (RBS) efforts to destroy thousands of its small business partners for profit.

The bank’s Global Restructuring Group (GRG) was supposed to help businesses struggling to manage RBS debts. But papers leaked from RBS in 2016 showed that thousands of businesses had been forced into liquidation through a combination of huge fees and fines by the GRG and the purchasing of their devalued assets by the bank.

The scandal of the GRG’s operations has taken another turn with evidence that the UK Treasury operation tasked with using taxpayers to insure against the default of £282bn in toxic loans, was intimately involved in pushing aggressive measures against small businesses.

The details of the Asset Protection Agency’s (APA) involvement in the GRG have come to light during legal action pursued by Oliver Morley Estates, a warehousing company in north west England, who say a request for refinancing by RBS was blocked by APA, which is a wing of the Treasury.

Read more: 10 years since the crash – Where did banking go wrong, and how do we fix it?

Emails revealed in court show RBS managers favoured the deal to rescue the business, but came under pressure by the APA, which operated between 2009 and 2012, to reject it, something described by RBS staff as “certainly their craziest decision yet”.

Ian Fraser, an investigative journalist whose book ‘Shredded: Inside RBS – the Bank that Broke Britain’ is being published in a second edition in April to take account of recent scandals surrounding the GRG, told CommonSpace that while the APA’s role had been suspected for a long time, the extent of its influence has been exposed in court papers.

He said: “It’s long been known that the government’s Asset Protection Agency, which was the body set up by [then chancellor] Alisdair Darling in 2009 to oversee the gargantuan asset protection scheme which initially insured £325bn of RBS toxic assets…was basically guiding the GRG, which plundered and asset stripped tens of thousands of British and foreign companies.”

“What the Oliver Morley court case documents have thrown up is more detail, more granularity of that. That the APA was effectively involved in detailed, day to day management [of small and medium sized businesses] and urging RBS to treat certain companies or certain assets in certain ways, rather than just taking a more hands-off approach and just looking at a monthly statement of how many businesses it’s plundered or ransacked.”

Fraser also said the difference between the way the government treated RBS itself, which had its massive stock of toxic loans underwritten by taxpayers at enormous cost to the pubic coffers, and how it treated RBS’ client small businesses – forcing them to the wall in order to recapitalise the bank, revealed the hypocrisy of a Tory party that styles itself as the natural home of small business.

Read more: What would RBS have to do for the kow-towing from politicians to end?

He said: “The hypocrisy is almost unreal, because you’ve got a bank that would have been utterly dead in the water, extinct unless taxpayers had stepped in with £500 billion to 1.3 trillion bailout package back in 08-09.

“The state is willing to salvage that complete disaster area, because it believes it’s worth it…and yet the companies, many of which have done nothing wrong, its just that RBS rather fancies their assets, and they’ve found ways of engineering default and getting good businesses in there so they could take ownership of the companies and therefore their assets. The contrast is stark.”

Former Tory chancellor George Osborne knew about some of the dangers posed by the GRG within the first year of the Tory Government elected in 2010.

His priority, Fraser said, was to return RBS to private ownership quickly following its nationalisation during the 2008 banking crisis, regardless of the damage to the many smaller firms who are debtors to the bank.

“The whole asset protection scheme was put together by a bunch of investment bankers who had never run an SME (small to medium sized enterprise) in their lives. They didn’t really think about the consequences for SMEs.”

Read more: Has the Growth Commission learned from the 2008 crash?

“The Treasury is very heavily influenced by the City and investment banking, in terms of the revolving door with top-level civil servants.”

He added: “[Osborne] didn’t want it to be soft on businesses, he wanted it back to profitability, re-capitalised and back to private ownership as quickly as he could.”

The public, Fraser said, shouldn’t trust bank lending practices, and said large banks like RBS should be broken up and negative lending practices disincentivised through the ending of lucrative bonus schemes which encourage bankers to “lend as many or as much product as they can”. Smaller and more local banks were required, he added, as part of a wider change in banking culture.

Oliver Morley, the owner of the warehousing business, said the APA “appears to have encouraged the bank towards the path of what was effectively a sale to itself of a properly performing portfolio of properties”, and that he is considering legal action against the government, who are not party to the current court proceedings.

RBS are still majority owned by the public and returned to net annual profitability in 2017.

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Speaking to CommonSpace about the latest revelations, Kirsty Blackman MP, SNP Economy spokesperson, said: “The Chancellor must now make clear on whether or not any other parts of RBS, or other banks, had lending decisions vetoed by the APA. He must also set out how many times the APA block the Royal Bank of Scotland’s Global Restructuring Group from providing finance, and whether compensation will be provided.

“Mis-selling scandals have resulted in small businesses struggling or going under, and have played a part in people being pushed towards bankruptcy and homelessness.

“It beggars belief that despite the UK Government constantly arguing that it could not intervene to stop RBS from closing branches, the Treasury thought it fit and proper to force RBS to pull finance from customers.

“Whilst we are used to Scotland’s interests being side-lined by Westminster, it is astonishing that UK citizens appear to have had private lending restricted at the hands of a UK Government that is meant to be acting in their interests.”

Scotland and the UK remain in the austerity era 11 years after the banking crisis and the bailout of financial institutions including RBS.

Picture courtesy of Mark Ramsay

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