It’s wrong to blame politicians for current spate of RBS bank branch closures

Jim Craigen (Letters, 22 December) has a poor grasp of the facts surrounding the banking collapse when he blames politicians. The situation was created by bankers and not, as Mr Craigen says, by politicians. The problem started in America with what were called sub-prime mortgages. These were mortgages lent by institutions with little or no security, often exceeding the value of the properties by a considerable margin. Unlike in the UK, American mortgagees can hand back the keys and walk away with no obligation to repay if they find themselves in difficulties, and this happened on a large scale. The lending institutions parcelled these so called property assets and mortgage debts into bundles called derivatives and sold them to other financial institutions. These derivatives were actually toxic debts as the properties were not worth enough to cover the loans. RBS, under the stewardship of Fred Goodwin, bought ABN AMRO, a Dutch bank, in what was hailed by Alec Salmond, ex-economist with RBS, as a great deal. The directors of RBS, however, had apparently not exercised due diligence in the acquisition and it was discovered that in buying ABN AMRO they had bought a huge amount of these worthless derivatives. It was that that led to the near collapse of RBS and other banks.

Alistair Darling, the then Chancellor of the Exchequer, was told in a phone call from the Chairman of RBS that the bank was going to collapse in a matter of hours. That could have led to a virtual collapse of the banking system worldwide and so immediate action was taken for the Bank of England to pump £15 billion into RBS and about another £22bn into other banks, including HBOS.

If this had not been done the financial situation which would have resulted would have made the current position seem like Utopia and there would have been no RBS at all for Jim Craigen to fret over, let alone some of its branch closures.