Monday, November 25, 2013

Banks 'destroying small firms': Cable report accuses RBS and Lloyds of 'unscrupulous' practices. Probe claims RBS and Lloyds have deliberately caused small firms to fail.

What's unstated here is how much of this is going on in banks that are not state backed/owned... -Bill

Banks 'destroying small firms': Cable report accuses RBS and Lloyds of 'unscrupulous' practices

Probe claims RBS and Lloyds have deliberately caused small firms to fail. RBS, 80 per cent owned by taxpayer, referred to financial watchdogs. Bank claims it tried to help the businesses, 'but can't save all of them'

PUBLISHED: 17:26 GMT, 24 November 2013 | UPDATED: 00:30 GMT, 25 November 2013

Business Secretary Vince Cable
commissioned the report which
accuses the two banks,  which are
part-owned by the  taxpayer, of
deliberately ruining small firms
Britain’s two State- backed banks have been accused of ruining thousands of small firms by using ‘unscrupulous’ business practices.

Royal Bank of Scotland and Lloyds ‘harmed their customers through their decisions and caused their financial downfall’, according to a bombshell report released today.

RBS is said to have acted like a ‘hit squad’ by deliberately causing healthy businesses to go bust for its personal gain.

In the worst cases, the bank withdrew lines of credit for previously solvent firms by charging eye-watering fees and charges so it could then seize their assets – typically property – at knockdown prices.

Lloyds Banking Group is also singled out in the extraordinary allegations in an independent report commissioned by the Government.

Entrepreneur Lawrence Tomlinson was asked by Business Secretary Vince Cable to look into small business lending.

He accuses many of Britain’s banks of ‘heavy-handed profiteering and abhorrent behaviour’. Last night Mr Tomlinson said if it was proved there was ‘systematic and institutional fraud’ at the banks, ‘you should see  people going to jail’.

His report reserved its most damning criticism for taxpayer-backed RBS and Lloyds. He said: ‘It is undeniable that some of the banks, RBS and Lloyds in particular, are harming their customers through their decisions and causing their financial downfall.’

The allegation will be a major embarrassment for both lenders and the Government, which owns an 82 per cent stake in RBS and 43 per cent in Lloyds.

It is understood the allegations focus on RBS' Global Restructuring
 Group (GRG) lending division, which handles loans classed as
 being risky
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Royal Bank of Scotland wins more time to mount defence against £4bn lawsuit from shareholders
Last night Mr Tomlinson, the founding chairman of the LNT Group, which employs more than 2,000 people, told Channel 4 News: ‘We’re really concerned that the businesses aren’t really struggling and are pushed over the edge. And then these extra fees tip them over administration, and then you’ve got the loss of jobs but end up with RBS owning the property.
‘If it is proved that this is systemic and institutional fraud, and there is quite a lot of evidence from people within the bank that this is the case, then the relevant action should be taken. If people have had their livelihoods stolen from them, you should see people going to jail.’

Eddie Warren and his wife Cheryl lost more than £1million, their livelihood and their marriage after borrowing from RBS.

The couple bought the Bold Hotel in Southport in 2007 for £3.7 million, using £1.2million of their own money and  taking out a loan from the bank.

A condition of the loan was that they had to take out an interest rate swap to protect them when base rates increased, but this led to them paying high fixed interest on their loans and an additional £120,000 a year in penalties as rates tumbled. After the hotel was placed in RBS’s Global Restructuring Group it was valued at just £1.8 million. By the autumn of 2011, the business was pushed into administration.

RBS property company West Register bought the hotel for £1.4 million several months later.
The bank claims the business may only just break even when it is sold but Mr Warren says it could soon be worth £4 million as the property market recovers.

He said: ‘They stole it. Even if the property market was depressed it would be worth £3 million.’
The report claims to have uncovered ‘very concerning patterns of behaviour leading to the destruction of good and viable UK businesses’.

It suggests RBS engineered businesses to default on their loans to move them into a special division called Global Restructuring Group (GRG).

Once in GRG the firms were then hit with exorbitant rates and fees, which in some cases caused them to collapse, allowing RBS to buy their property and assets on the cheap, the report claims.
Mr Tomlinson said he was calling for ‘immediate action to stop this unscrupulous treatment of businesses’.

The report recommends that RBS and Lloyds be made significantly smaller, removing conflicts of interest within the banks, and creating a number of smaller, purely retail commercial banks.

The Mail launched its Make the Banks Lend campaign three years ago, to highlight the plight of small firms in accessing credit, but Mr Tomlinson’s findings show many small businesses are still being unfairly treated.

Mr Cable said evidence against RBS in the report had been referred to the Financial Conduct Authority and the Prudential Regulation Authority.

Matthew Sinclair, of the TaxPayers’ Alliance, said: ‘This is shocking news for taxpayers who bailed out these banks to the tune of billions of pounds.’

A spokesman for RBS said: ‘GRG successfully turns around most of the businesses it works with, but in all cases is working with customers at a time of significant stress in their lives.
'Not all businesses that encounter serious financial trouble can be saved.’

A spokesman for Lloyds said: ‘The specific practices discussed in the report are attributed to another bank and are not a reflection of Lloyds Banking Group’s approach.’

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