Exclusive: a whistleblower from RBS's shadowy GRG unit claims that staff destroyed businesses "that didn't need destroying" in an attempt to help save the bank during the credit crisis.
Staff inside RBS's global restructuring group, GRG, used "immoral, survivalist tactics" to destroy a number of businesses "that didn't need destroying" in an attempt to help save the bank during the credit crisis.
These are among a series of shocking allegations from the first ever whistleblower inside GRG to go public.
The whistleblower says of the unit's tactics towards its customers: "We gave them choices and they chose one bad thing or the other bad thing."
He also claims that GRG deliberately charged high fees to push businesses to the brink, intercepted payments and put the money into RBS' own accounts and stripped firms of their assets to make a profit for the bank.
The 'vampire' bank
GRG is already the subject of at least three investigations after a report commissioned by the business secretary, and another by RBS itself last year, questioned its behaviour.
Lawrence Tomlinson, the author of the report for Vince Cable, earlier this month told MPs that RBS was a "vampire" bank which has systematically destroyed small businesses by its ruthless treatment of entrepreneurs.
The whistleblower we spoke to would appear to corroborate that view. He told me GRG was set up to help nurse ailing businesses back to health, but halfway through 2008, he claims staff inside GRG were told the unit's ethos had to change.
From that point on we wouldn't be just looking to save businesses. We would be looking to recover all the monies back - RBS GRG whistleblower
"We were pretty much told at that point in time that the ethos, the mission statement, of GRG had changed," he said. "From that point on we wouldn't be just looking to save businesses. We would be looking to recover all the monies back that we had lost as much as possible. Overnight that took effect."
He said the amount of cases that were saveable suddenly fell from 75 per cent to probably 40 per cent.
"Although nothing had actually changed in terms of case save-ability, all that had changed was the people making the decision at the time," he added.
Pushed to the brink
He says the number of businesses inside GRG began to swell. And pressure was put on GRG operatives to come down hard on clients.
"It was at that point in time we started making different decisions and strategies with clients that wouldn't have had those decisions before."
While in the past they would meet with clients with a view to helping them, now a new "script" was adopted.
"We would tell them we were nervous. We would put them on a watch list," he said. "From that point on we would start saying we wanted to sign new terms and agreements with you where we take X stakes in your company or we take larger fees from your company."
The whistleblower admitted that in many cases the fees weren't for any actual support, but merely to weaken the business.
When asked by Channel 4 News, what the fees were for, he said: "Nothing really. The fees were just really there to make sure that they were being pushed to the brink, in my opinion. And we were often asked why we weren't putting more fees on these companies to get the most out of them."
How one business collapsed
This is exactly what happened to Mr and Mrs Smith. They ran a small hotel and events business in Suffolk but were suddenly transferred to GRG in 2008, they claim, for no apparent reason.
"They advised us that because in their eyes we were too highly geared.... we had too much lending, that they would have to look at their support for us and how they were going to take us forward and the fact that they needed to sell one or either of our assets," the couple told Channel 4 News.
Any assets we had that we wanted to sell onwards we couldn't really legally hold in to at RBS so we would move them to West Register - Whistleblower
Once entering GRG the Smiths were charged monthly fees for support, although they say the fees were never fully explained to them. In all, they were forced to pay out more than half a million pounds in just over two years, which eventually pushed the Smiths into bankruptcy.
Both hotels were sold and one ended up in another investment unit of RBS, called West Register.
In a statement, RBS said: "After the crash, tens of thousands of our customers saw their asset values plummet and ended up in serious financial difficulty. This was an economic crisis for Britain, but it was also a very personal tragedy for many families and small businesses around the country of which this is a prime example.
"In this case, we gave continued support for four years including over £480,000 in new loans and overdrafts. RBS has written off £767,000 on this case and the hotel we now own, bought in an open market process for £2m, continues to make an annual loss, despite RBS investing a further £175,000 to refurbish and update the hotel. The charges in this case equate to approximately an extra 4 per cent a year increase on the total borrowings, and reflects the significantly increased risk and work the bank needed to do with this struggling business."
'Morally it was bankrupt'
The whistleblower claims that in many cases, getting assets into West Register was the deliberate intention.
"Any assets we had that we wanted to sell onwards we couldn't really legally hold in to at RBS so we would move them to West Register or sell them to West Register for a very small amount of money," he said. "Sell them onwards and make money off that and put it back onto the RBS balance sheet."
"It just verged on illegal," he claimed. "But morally it was bankrupt."
Among other revelations, the whistleblower claims:
- GRG operatives were told to intercept payments from businesses and transfer the money instead to RBS to reduce the size of the businesses' loans.
- GRG had complete control over customers' accounts and weren't answerable to any other part of the bank.
- GRG could oversee Natwest, RBS and Coutts customers, which technically they weren't supposed to do, but which staff did anyway.
It's not clear whether any of the actions the GRG whistleblower is alleging are legal or illegal. Certainly, at the very least, there's a case that GRG's behaviour was both morally and ethically dubious.
But until the various investigations - by the financial conduct authority and the serious fraud office, among others - report back we won't know for sure.
And even then, that won't bring the businesses like the Smiths back to life. Their hotels are gone and their family company destroyed, like hundreds of others who seem to have gone into GRG intact on one side, and come out bankrupt on the other.
An RBS spokesperson said: "GRG successfully turns around the vast majority of businesses it works with, unfortunately not all businesses that encounter serious financial trouble can be saved. Last year GRG successfully restructured 650 SMEs, safeguarding thousands of jobs.
"These are serious allegations that have done damage to RBS's reputation and the independent review by Clifford Chance we have commissioned will examine these. We refute the accusations put forward that we are systemically defrauding businesses and no evidence has been provided to the bank."
Right now, the Smiths say they'll settle for answers as to what really happened. The truth.
We need answers too. Because all this happened after the bank's £45bn bailout, when we - the taxpayer - owned it and it was supposed to be acting in our interests.
If it turns out it was doing the exact opposite, we too have a right to know.
11 February 2014
01 November 2013
06 February 2013