Baptism of fire for new RBS boss: Alison Rose faces court battle over claim that bank trashed small businesses
Alison Rose will face a baptism of fire when she takes the top job at Royal Bank of Scotland next month.
The 49-year-old, who is stepping up from the role of deputy chief executive at Natwest to chief executive of its owner, will immediately be faced with a court case over one of the longest running and most toxic disputes in the bank’s history.
RBS is due to appear in the High Court in early November where it will face more awkward questions about its Global Restructuring Group (GRG) and its relationship with the Treasury.
Alison Rose, 49, who is to become the chief executive of RBS, will immediately be faced with a court case over one of the longest running and most toxic disputes in the bank’s history
The trial is being brought by Oliver Morley, a property developer who took out a loan from RBS and is suing the bank for damaging his business.
He claims that GRG placed him under ‘economic duress’ which led to some of his assets being seized by RBS in 2010 and sold for the bank’s own profit.
Morley will also claim that the Government piled pressure on GRG to ruin small businesses in order to boost RBS’s profits by taking their assets.
The bank’s actions came in the wake of the financial crisis, when the Government owned just over 80 per cent of RBS following a £45.5billion taxpayer bailout.
The Asset Protection Agency (APA), a now-disbanded Government agency, insured more than £280billion of RBS’s bad loans.
The Treasury’s idea was that insuring the loans would encourage banks to lend again in the aftermath of the financial crisis, when many were worried that borrowers would be unable to repay their debt.
Morley’s lawyers want to establish exactly how much influence the APA exerted on GRG, and whether it contributed to the distress or collapse of thousands of small businesses.
The property developer alleges that GRG was essentially used to wring money from small businesses, referring to the group’s own policy documents which describe it as a ‘profit centre’.
After being lumped into the GRG, under circumstances which he claims were unfair, Morley alleges he made arrangements which would have allowed him to repay his debt.
But an email which will be used in evidence, believed to be from the APA’s chief credit officer Brian Scammell, stated that the bank would be able to extract more money if RBS instead squeezed his business so it could no longer operate, and then acquired his property portfolio.
In another email to a colleague, RBS employee Joss Brushfield said this was ‘certainly [the APA’s] craziest decision yet’.
Morley eventually reluctantly agreed to hand over two-thirds of his properties to RBS’s property division West Register. He will argue it was an agreement he would never have signed had it not been for the economic duress which the bank placed on him.
In further court documents, an internal memo from RBS dated June 2010 said that there was a common theme of the APA ‘wanting us to use West Register to acquire property assets’, and using its power to force GRG down that route.
An investigation by the Financial Conduct Authority found that RBS had failed to handle the ‘inherent’ conflicts of interest which arose when West Register acquired assets from distressed businesses in GRG.
It added that between 2008 and 2013, GRG focused on extracting money from thousands of smaller companies.
The restructuring group caused ‘material financial distress’ at one in six of the ‘viable’ companies it managed, the report stated.
A spokesman for RBS said last night: ‘The bank fundamentally disagrees with Mr Morley’s claims and does not believe they have any merit. It is contesting them vigorously in court.
‘The bank incurred around £30million of losses on the £75million it lent to Mr Morley, who was a sophisticated customer in receipt of extensive professional advice.
The consensual deal ultimately reached with the bank was proposed by Mr Morley and his advisers.’