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'Bullying' RBS could face parliamentary probe into rising legal defence costs

Royal Bank of Scotland could face a parliamentary inquiry into spiralling legal costs of defending itself and disgraced former boss Fred Goodwin in a case brought by shareholders after being accused by MPs of "bullying tactics".

Three members of the influential Treasury Select Committee have warned over political concerns about the taxpayer-backed lender's legal costs, which are set to hit £125 million - including £6.5 million on defending Mr Goodwin and three other former directors.

Labour MPs Rachel Reeves and Wes Streeting, and prominent Conservative backbencher Jacob Rees-Mogg, are demanding RBS bosses justify the "fortune" spent on the case at Friday's first quarter results.

They also want chief executive Ross McEwan to explain comments made earlier this year apparently criticising staff among those suing and suggest a committee inquiry could be launched once the case is over.

Mr Streeting said: " RBS is waging a legal war against 27,000 small investors who have spent years trying to get justice.

"It's both a grotesque waste of money and a bullying tactic. And it's all the more concerning because taxpayers are footing the huge bill."

The case, which comes to trial next month, is becoming one of the most costly civil defences in British history as RBS defends itself against claims brought by staff and shareholders over the lender's £12 billion cash-call during the financial crisis.

Shareholders allege RBS misled them about its financial health at the time of the 2008 rights issue, which happened shortly before it was bailed out with more than £45 billion of taxpayer cash, leaving investors nursing big losses.

The bank - still 72% owned by the State - has already settled with around 80% of investors in the action last December, although it has not admitted liability.

The RBS Shareholder Action Group, which includes around 27,000 small investors and current and former staff, has not agreed to settle out of court.

Ms Reeves said: "If RBS loses this case, the bank will have a lot of explaining to do to staff, shareholders and the public on why it spent a fortune on this case."

Mr Rees-Mogg added: "This affair is being closely watched by members of the Treasury Select Committee and is the type of issue the Committee may well look into once legal proceedings are completed."

Mr McEwan is also facing backlash over comments made in February over reports that former RBS vice-chairman Sir Angus Grossart was seeking to join the shareholders action group, when he said "if I was an ex-director or a member of staff, I would not be taking a case against the bank I had served on".

"If I was a senior executive and I was responsible for the bank, I would not do that," he added at the time.

The MPs' comments follow those made by former business secretary Vince Cable last week. Mr Cable said the bank's legal costs were "obscene" and branded money spent on defending Mr Goodwin as "shocking".

Mr Goodwin - formerly Sir Fred - was stripped of his knighthood following the bank's near-collapse and government rescue.

He will take the witness stand in the case on June 8, which is also the date of the general election.

On the scale of the legal costs, RBS has already said it believes it has "strong defences to this claim and will defend ourselves vigorously in court".

It said on covering Mr Goodwin's legal costs it was "normal practice under company law that directors would be indemnified in relation to any third party legal action arising from their tenure".

An RBS spokesman stressed the bank had not sought to "discourage" staff from taking part in the legal action.

He said: "Ross's comments were directed at former non-executive directors and senior executives with responsibility for running the bank at the time.

"We understand that thousands of members and former members of RBS staff are taking part in these pre-existing proceedings and the bank has in no way discouraged their participation."

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