The Royal Bank of Scotland is facing a further raft of claims from small and medium sized businesses that could result in billions of pounds in damages awards being paid out. The complaints focus around the conduct of the RBS Global Restructuring Group (GRG); principally that good companies were forced out of business by tactics employed by RBS GRG to maximise profits during the financial crisis.
GRG was set up to handle lending to companies that were classified as riskier borrowers, with GRG offered to these companies as a “means to help” companies in distress. However, these recent allegations argue that GRG had wide ranging authority to re-structure loans, impose increased interest rates and charge penalties for breach of covenants. The claimant groups argue firms were engineered into GRG by RBS on the back of trivial breaches of loan facilities, and GRG thereafter re-structured loans, increased interest rates and employed other tactics to maximise recovery by RBS, at the company’s expense.
RBS commissioned a report by Clifford Chance to investigate the allegations, which found “no evidence” of wrongdoing by RBS. The report did however find that there were areas where RBS could improve transparency regarding fees and the way it handled small business customers.
Despite the report from Clifford Chance, a further independent report has been prepared by the Financial Conduct Authority into the conduct of GRG. Publication of the report is expected in summer 2016. This report is eagerly awaited by small and medium sized business owners (and their legal representatives) as findings of misconduct against RBS could result in a wave of legal action against the bank by customers who went through GRG, many of which were ultimately put out of business.
Whilst the eagerly awaited report is being finalised, there are currently 270 small and medium sized companies that have come together to bring a group action against RBS, and four senior individuals within the bank. Individuals who are set to be named in proceedings are outgoing Chairman, Sir Philip Hampton; former deputy Chief Executive Chris Sullivan; Derek Sach, former Head of GRG and Aubrey Adams, Head of West Register (the RBS property unit).