FINANCE: RBS has announced plans to wind down West Register following an independent review triggered by the Tomlinson report.
The closure of the internal property business is one of a series of recommendations made by RBS as it was announced that law firm Clifford Chance found no evidence that the bank had systematically set out to defraud its business customers in a review of allegations by government adviser Lawrence Tomlinson.
West Register buys assets when they are marketed by receivers, and RBS feels that the offers on the open market do not reflect the long-term value. It has a portfolio of around £3.5bn across the UK and Europe.
On West Register it said: “Under the previous capital regime property purchases were a viable option when resolving some corporate restructures.
“Clifford Chance has found that the banks vehicle for bidding on property, known as West Register, operated largely in an open market process and with strict internal controls.
“However, RBS acknowledge there was a damaging perception that the bank had a conflict of interest when it purchased a property as part of a restructuring process, despite the fact that West Register has only successfully bid for property owned by 166 SMEs in the past five years.
“The bank has taken the decision to wind down and sell any assets in West Register.”
Alongside the recommendations to “enhance its support for SMEs when they get into financial trouble”, RBS welcomed the findings of the Clifford Chance review.
The central allegation made by Tomlinson, entrepreneur in residence at the department for business, innovation and skills in November last year in his report was that the bank, through its Global Restructuring Group, was guilty of systematically setting out to defraud its small business customers.
RBS’s West Register property business was at the centre of allegations that the taxpayer-owned bank is killing off small businesses for its own gain.
Tomlinson’s report claimed: “RBS has forced vibrant businesses into financial trouble, only to profit from their distress by squeezing them for exorbitant fees and charges and ultimately seizing their assets to swell its own vast property empire.”
One of the main mechanisms by which the bank was accused of engineering a default and transfer to business support was through revaluations.
Tomlinson, who prepared the report for business secretary Vince Cable, said a reassessment of loan to value “appears to have been used on frequent occasions to put business in to default of their loan agreements”.
Clifford Chance interviewed 138 small business customers in the recovery unit and concluded that there was no evidence to support this damaging and serious allegation.
RBS chief executive, Ross McEwan, said: “The trust that a bank has with its customers is fundamental. That trust was put at risk at RBS by the allegation of systematic abuse made in the Tomlinson report.
“I welcome the Clifford Chance findings which show no evidence of the serious and damaging allegation that we had set out to deliberately defraud our business customers.
Separately, a Financial Conduct Authority investigation in to GRG which commenced in January, is ongoing. It is expected to be published in the third quarter of the year.
bridget.oconnell@estatesgazette.com
