Business World

Saturday 18 November 2017

UK watchdog clears RBS of fraud

Britain's financial regulator today ruled out action against former bosses at Royal Bank of Scotland after finding no evidence of fraud or dishonest activity in the lead-up to the financial crisis.

The Financial Services Authority (FSA) cleared the firm and individuals, including former chief executive Sir Fred Goodwin, but warned that their competence would be taken into account in any future applications made by them to work at FSA-regulated firms.

In its investigation into the bailed-out bank, the FSA said RBS made a series of bad decisions in the years immediately before the financial crisis, most significantly the acquisition of Dutch bank ABN AMRO and the decision to aggressively expand its investment banking business.

But it added: "The review concluded that these bad decisions were not the result of a lack of integrity by any individual and we did not identify any instances of fraud or dishonest activity by RBS senior individuals or a failure of governance on the part of the board."

It said the findings of its investigation did not warrant taking any enforcement action, either against the firm or against individuals.

"However, the competence of RBS individuals can, and will, be taken into account in any future applications made by them to work at FSA regulated firms," it said.

The FSA launched its investigation into RBS in May last year after it became one of the UK banks to require partial taxpayer bail-out support.

The review, carried out with help from accountancy firm PwC, considered if regulatory rules had been broken and what, if any, action was appropriate.

"The review was necessarily extensive and looked specifically at the conduct of senior individuals at the bank, the acquisition of ABN AMRO in 2007 and the 2008 capital raisings," the watchdog said.

The FSA's supervisory investigations into other banks that failed during the crisis are continuing.

The FSA has already agreed that Johnny Cameron, who headed the RBS investment banking division, will not take a full-time job in the financial services industry.

The near-collapse of RBS, which is now 83pc-owned by the taxpayer, arose from a series of takeovers and losses in its investment bank.

After acquiring NatWest in 1999, Mr Goodwin led a series of takeovers, including a $10.5bn (€7.96bn) deal for US bank Charter One in 2004.

RBS also led the consortium that bought Dutch bank ABN AMRO for €70bn in October 2007.

The bank was one of the worst hit by the credit crunch - when banks stopped lending to each other due to market fears over exposure to potential losses on high-risk US mortgages - and in early 2008 it was forced to write off £2.5bn of investments.

Later in 2008, RBS asked shareholders to pump in £12bn of new capital under the biggest rights issue in UK corporate history, as it unveiled another £5.9bn of credit-crunch writedowns.

The Edinburgh-based bank said today: "RBS is wholly focused on our work to restructure the bank and rebuild value for shareholders. We welcome the conclusion of the FSA's review."

Press Association

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