Business World

Friday 24 March 2017

Claim RBS bosses blocked markdowns

Fred Goodwin
Fred Goodwin

ROYAL Bank of Scotland bosses avoided repricing billions of dollars of souring investments on the eve of the 2008 financial crisis for fear of endangering bonuses and a takeover bid for a rival, court documents allege.

The claimants' filings allege senior managers were warned by internal risk experts for more than six months that overvalued toxic debt, including subprime mortgage bonds, had left the bank dangerously exposed to a collapse in US property prices.

But some managers resisted the warnings, allege lawyers acting for RBS shareholders now seeking billions of pounds in compensation for losses suffered when the bank was bailed out in the 2008 crisis, according to the claimants' "particulars of claim" and a witness statement seen by Reuters.

In documents filed by lawyers acting for Ulster Bank owner RBS, the bank rejects those allegations, and denies that it should have repriced assets more promptly or that it misled shareholders over its finances.

The allegations, which focus on the months leading up to the 2008 crisis, are at the heart of a £4bn (€4.6bn) lawsuit brought by thousands of RBS's investors, which is due to start in the UK early next year. Documents seen by Reuters include the claimants' particulars of claim and the bank's defence.

In the 1990s and 2000s, RBS had gone from being a small Scottish lender to a global banking giant, largely thanks to an aggressive expansion plan led by former chief executives George Mathewson and Fred Goodwin.

Sinead Cruise

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