The Dash For Cash: Leaked Files Reveal RBS Systematically Crushed British Businesses For Profit


The RBS Files expose the bank’s secret scheme to boost revenues during the financial crisis

by draining businesses of cash and stripping their assets, blowing apart its previous

statements to the public and parliament.


10 October 2016


The Royal Bank of Scotland killed or crippled thousands of businesses during the recession as a result of a deliberate plan to add billions of pounds to its balance sheet, according to a leaked cache of thousands of secret documents.  The RBS Files – revealed today by BuzzFeed News and BBC Newsnight – lay bare the secret policies under which firms were pushed into the bank’s feared troubled-business unit, Global Restructuring Group (GRG), which chased profits by hitting them with massive fees and fines and by snapping up their assets at rock-bottom prices.  The internal documents starkly contradict the bank’s public insistence that GRG acted as an “intensive care unit” for ailing firms, tasked with restructuring their loan agreements to “help them back to health”.


RBS has repeatedly denied allegations that it destroyed healthy businesses for profit – first raised in a damning report on its treatment of small-and medium-sized enterprises (SMEs) by the government adviser Lawrence Tomlinson three years ago. The bank paid the magic circle law firm Clifford Chance to conduct an “independent investigation” that found “no evidence” of the claims, and an official inquiry by the banking regulator has been long delayed.  The RBS Files now reveal for the first time that, under pressure from the government, the taxpayer-owned bank ran down businesses in its restructuring unit as part of a deliberate, premeditated strategy to cut lending and bolster profits. And they show that GRG, ignoring repeated warnings about conflict of interest, collaborated closely with the bank’s own property division, West Register, to buy up heavily discounted assets it had forced its customers to sell.


When confronted with the leaked evidence last week, the bank made its first major admission: “In the aftermath of the financial crisis we did not always meet our own high standards and let some of our SME customers down.” But it continued to deny that it had “targeted businesses to transfer them to GRG or drove them to insolvency”.  The files reveal that 16,000 firms were sucked into the restructuring unit after the financial crash – including care homes, hotels, farms, and children’s centres. BuzzFeed News has spoken to 15 small-business owners who say their healthy firms were ruined after they were put into GRG. Some have lost their homes, marriages, and health as well as the companies they built from scratch and all their assets.


The documents – comprising internal emails, confidential memos, secret policy documents, minutes, and financial records leaked from inside the bank by an anonymous whistleblower – today show:


  • RBS managers encouraged employees to hunt for ways to boost their bonuses by forcing customers into loan restructuring in order to extract heavy fees as part of a profit drive nicknamed “Project Dash for Cash”.

  • Firms that had never missed a loan payment were pushed into GRG under the bank’s secret policies for reasons that had nothing to do with financial distress, including for telling RBS they wanted to leave the bank, falling out with managers, or threatening to sue over mistreatment.

  • Once in GRG, firms were hit with crippling fees, fines, and interest rate hikes that could run into seven figures, helping to net the restructuring unit a profit of more than a billion pounds in a single year.

  • Contrary to claims by the bank, there were no Chinese walls between GRG and West Register bosses, who sat together on both the controlling committee that held sway over which businesses were transferred into the restructuring unit and the property acquisition committee that signed off the bank’s bids for their distressed assets. Auditors repeatedly warned about perceived conflicts of interest in GRG.

  • The property division, which amassed assets worth £3.3 billion during the crisis, was passed information that was not available to other bidders when it wanted to acquire properties from businesses in GRG. In contrast to what RBS executives told parliament, properties could be sold to West Register without being advertised on the open market.

  • Staff were told to conceal conflicts of interest from customers when demanding cheap shares in their businesses or stakes in their properties.


The revelations will pile pressure on the Financial Conduct Authority (FCA) to conclude its long-delayed inquiry into RBS’s treatment of its small-business customers. Tomlinson, whose report triggered the FCA probe, said the documents obtained by BuzzFeed News “seem to prove that there was a policy within RBS to destroy businesses, to add value to their balance sheet through GRG”. He urged the regulator to act decisively: “Those people should now be brought to book.”  Alison Loveday, who says her law firm Berg has dealt with “hundreds of cases” in which healthy firms were “devastated by GRG’s activities”, called on the FCA to take urgent action to ensure business owners are “properly compensated for the loss and damage they have suffered”. She blamed GRG’s heavy-handed tactics for causing “heart attacks, family breakdown, and even suicides”. 


The RBS Files raise serious questions about the basis on which Clifford Chance exonerated the bank in its 2014 report, which was welcomed by RBS chief executive Ross McEwan at the time as evidence that GRG was “a pretty good unit”. The documents also expose the hollowness of the evidence given to the Commons Treasury select committee by RBS executives, who told MPs the restructuring division’s “main objective is to restore the customers’ health and strength” and denied 27 times that it sought profit.  Derek Sach, who headed GRG, and Chris Sullivan, the bank’s then deputy chief executive, testified that staff were not put under pressure to increase customers’ fees and that properties acquired by West Register were “always marketed on the open market” – claims the internal documents contradict. 


The bank’s chairman, Sir Philip Hampton, later had to write to the committee to withdraw the executives’ repeated assertion that GRG was “absolutely not a profit centre”, claiming they had made “an honest mistake”. The RBS Files reveal that both Sach and Sullivan were sent regular updates on GRG’s “profit and loss” performance, which itemised revenues from fees, interest rate hikes, and asset acquisitions that far exceeded its costs. Sach, who told MPs that GRG “does not contribute to the bank’s profits at all”, was responsible for signing off internal documents that described the unit as “a major contributor to the Group’s bottom line”.  The white-haired restructuring boss emerges from the documents as an all-powerful puppet master, simultaneously heading the management committee that held sway over which businesses were transferred into GRG, the West Register committees that decided which assets the property division should acquire, the asset purchase committees that signed off its major bids, and the risk and audit committee that scrutinised the restructuring division’s work. Repeated warnings from RBS’s external auditors about the “reputational risk” arising from this apparent conflict of interest were ignored. Sach declined to comment when contacted by BuzzFeed News. 


The documents show GRG staff were asked to split customers into two groups – those considered “viable” and those “the bank would like to exit”.  “Viable” firms would have their debts restructured to boost the bank’s revenues and often be forced to surrender cheap stakes in their assets or equity to GRG’s investment arm. But if firms were considered a potential risk, even if they were not insolvent, staff were instructed to “exit” by “placing pressure on the company to repay the debt as soon as possible through refinancing, realisation of assets, and possibly commencing insolvency proceedings”.  When assets were sold out of insolvency, often for dramatically discounted prices, West Register would be brought in to decide if it wanted to make a bid, with GRG managers privately guiding its staff on just on how much they would need to offer.  RBS has repeated its denial that the property division profited by buying assets cheap and selling them on for an inflated price. But confidential internal audit documents note that West Register is “used by GRG to acquire property assets from distressed situations” and “seeks to exit properties via a future commercial sale in order to extract maximum economic value” that “can often result in a capital gain in relation to the original property acquisition”. 


In a statement, RBS said it had lost £2 billion on its loans to small and medium-sized businesses during the financial crisis. It said RBS did not make an overall profit from GRG’s activities – the restructuring unit’s revenues did not exceed the losses the entire bank suffered on business loans gone bad after the crash. But its statement acknowledged, for the first time, that “a number of our customers did not receive the level of service they should have done” in GRG.   “We could have managed the transition to GRG better and we could have better explained to customers any changes to the prices or fees we were charging,” its statement said. “We also did not always handle customer complaints well. As a result, a number of our customers did not receive the level of service they should have done or, importantly, that they would receive now.” The bank also said it would change its internal policies so that a customer litigating against the bank would no longer be among its restructuring “triggers”. 


But RBS still insisted that “GRG’s role was to protect the bank’s position, where possible by working with distressed businesses to return them to financial health,” and said it had seen “nothing to support the allegations that the bank artificially distressed otherwise viable SME businesses or deliberately caused them to fail”.  A cornerstone of RBS’s denial that it systematically destroyed small businesses has been the insistence that it had no reason to push good customers into difficulty. But the files reveal how government pressure to reduce its loan exposures, coupled with the opportunity to raid the cash, equity, and assets of businesses going under, gave the bank a powerful incentive to pull the plug on thousands of its customers.  The government and regulators pushed RBS to achieve three main goals after the bailout. First, they pressed the bank to reduce its exposure to property loans, which were a main cause of the financial crisis. Then they required RBS to increase its capital reserves as a buffer against losses. Finally, they pushed for the bank to make more money overall, so that it could increase its lending to new businesses to aid the economic recovery, and so the government could sell its ownership stake at a profit. RBS devised a strategy to do just that. 


The plan – which bosses told staff the government had “endorsed and agreed” – was to offload tens of billions of pounds’ worth of business loans that the bank had deemed “non-core”. It was widely hailed as an essential move to shore up the bank’s finances after the crash and protect the taxpayer’s investment.  But the RBS Files now reveal GRG played a central role in the delivery of that plan, acting as a clearinghouse for many of those “non-core” businesses as the bank pushed them towards the exit door: generating bumper revenues by extracting massive fees and fines, clawing back loans secured against property, seizing chunks of their equity, and offloading their assets. Through West Register, the bank could acquire their prime properties at fire-sale prices, converting them from risky loan exposures into owned assets that the bank planned to sell off later for a capital gain. And, by quarantining the properties in a network of subsidiaries owned by West Register, the bank substantially reduced the amount of capital it had to freeze on its balance sheet as a regulatory buffer against potential losses, freeing up extra cash.


The inside story of how that plan was put together in the teeth of the financial hurricane – and went on to cause misery for business owners across the country – is revealed today for the first time............continue reading