Betrayal of clients worst crisis yet at scandal-hit institution
Ulster Bank has become notorious. It has had a series of IT disasters and is part of Royal Bank of Scotland, which had to be bailed-out by the UK taxpayer.
But in my opinion, the most appalling scandal in the UK banking industry in recent years is the role that Ulster Bank and its parent RBS played in closing down businesses that might have continued trading on a sustainable basis.
Some of these firms claim they were still recording profits when they were forced out of business by their bank.
The Global Restructuring Group is a subsidiary of RBS. It took over the account relationships from RBS and Ulster Bank in cases where borrowers had breached their banking covenants — conditions that were part of the loan agreements.
In some cases the breaches were technical, such as the late filing of accounts. In other cases, it was because of a fall in the value of the property for which the loan had been taken out.
Given that Northern Ireland suffered around a 50% fall in property values, this could have affected a large proportion of Ulster Bank customers.
Allegations made to Spotlight — and previously published in a report produced for the UK Government by Lawrence Tomlinson — claimed that the GRG closed down potentially viable businesses in order to improve the financial position of the RBS Group.
Even worse, went the allegations, in some instances this allowed another RBS company, West Register, to buy the assets cheaply, potentially giving the bank a profit on deals over the
long term. These allegations are denied by Ulster Bank and RBS.
This matters a lot to the Northern Ireland economy because West Register took over the ownership of some of our most prominent commercial assets. RBS has agreed to dispose of West Register, which will lead to many of these assets coming on to the market in the near future.
But what is even more important to the economy of Northern Ireland is that perhaps thousands of people lost their jobs because — to put it at its kindest — a largely taxpayer-owned bank failed to be patient to enable businesses in difficulty to trade their way out of their problems. Clients who expected their bank to show them loyalty and support, instead felt the bank pushed them into business closure.
RBS hired the firm of lawyers Clifford Chance to investigate the allegations.
The report concluded that RBS had not been “guilty of systematically setting out to defraud its small business customers”. But, in fact, there was no allegation of fraud made against RBS or Ulster Bank.
This is nowhere near the end of the story because the financial regulator, the Financial Conduct Authority, is also investigating. If this upholds even some of the allegations, RBS and the Ulster Bank could be in very serious trouble indeed.
- Paul Gosling is a journalist and commentator who was interviewed for the Spotlight programme
Belfast Telegraph Digital