£50m profit made off struggling businesses by RBS

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RBS’s global restructuring group, which operates West Register, has seen £276 million in revenue with over £50 million in profit from 2008.  Two reports released recently have condemned the bank’s lending actions and the amount they have been profiting from struggling businesses.

Wealthy adviser to the Department of Business, Innovation and Skills, Lawrence Tomlinson, blamed RBS for deliberately extracting profit and “killing off” small firms. He also believes that RBS had changed their valuations of properties without checking the property in person and then, after acquisition, selling the property for more than their appraisal. The information by Mr Tomlinson was submitted by Business Secretary, Vince Cable to the City regulators; in response to this RBS have said they have employed the services of Clifford Chance, a legal organisation, to look into the accusations made.

RBS had originally been accused of taking advantage of the unfortunate situations of firms through their Global Restructuring Group.

West Register Property Investments saw an increase in assets to £579 million in 2012 from below £19 million in 2008. However exact financial records are inaccessible for the GRG branch of RBS as it is operated as a profit centre.

The shadow business secretary, Chuka Umunna stated his worries that RBS being an 81% state held bank were seeking profit amongst troubled clients.  She states if RBS’ business turnaround division, the Global Restructuring Group, “is being used principally as a profit centre as opposed to an operation to help businesses and prevent loss, that rings alarm bells and sends the wrong message… It would paint a picture of otherwise viable businesses being fleeced for fees and profit, instead of being given the support they need.”

Penalty fees totalling over a hundred thousand pounds have been reported by business clients of RBS who have used their GRG. In addition to this many have been required to pay for external specialists.

In RBS’ defence Ross McEwan said that steps have been made to help companies with lending strategies to stem “reckless lending practices that broke this bank five years ago”. It seems to us like another attempt to cover up bad banking practices like the payment protection insurance mis-selling, and the fixing of rates. Let’s hope the FCA take note…

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