RBS accused of forcing closure of small businesses

RBS is facing allegations that it deliberately forced small firms out of business so that it could buy back their assets at low prices.

City regulators have been handed a report by an advisor to business secretary Vince Cable, which compiles evidence from hundreds of businesses asserting that the bank forced companies to default on loans in order to seize their properties.

The business secretary said that the allegations in the report, compiled by businessman and entrepreneur-in-residence at the department for business and skills, Lawrence Tomlinson, were so serious that he handed it to the bank and to regulators.

It has also been given to former Bank of England deputy governor Sir Andrew Large, who is compiling a report examining lending failures by RBS, due on Monday.

Tomlinson’s report compiles evidence from companies that were moved into the turn-around division of RBS, the Global Restructuring Group (GRG), which dealt with loans seen as risky, and had the power to scrap loans, raise interest rates and charge harsh fines.

The report says that many firms were not in immediate financial distress, but were “engineered” into the division through minor breaches of loan terms such as late filing of insignificant financial information.

Companies were then hit with high interest rates and fines, which proved to be too great a financial burden in many cases.

This then allowed RBS’s property arm West Register, to move in and buy firms’ property and assets at rock-bottom prices.

Tomlinson said he was demanding “immediate action to stop this unscrupulous treatment of businesses”.

He added: “From the cases I have heard, it is clear that a perception has arisen that the intention is to purposefully distress businesses to put them in GRG and subsequently take their assets for the West Register at a discounted price.”

“There are many devastating stories of how RBS has wrecked good businesses and the ruinous impact this has on the lives of the business owners.

“I look forward to seeing how RBS proposes to take forward the forensic investigation into this part of the bank.”

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