Chief of toxic RBS arm felt pres­sure to break up firms

Scottish Daily Mail - - City & Finance - by Lucy White

THE former head of the toxic re­struc­tur­ing arm at Royal Bank of Scot­land has told how the lender was put un­der pres­sure by a Gov­ern­ment agency to push its small busi­ness cus­tomers into fi­nan­cial dis­tress.

Ap­pear­ing in court for the first time, Derek Sach (pic­tured) de­scribed the fraught re­la­tion­ship be­tween the bank and the As­set Pro­tec­tion Agency (APA) in the wake of the fi­nan­cial cri­sis.

The 71-year-old, who ran the Global Re­struc­tur­ing Group (GRG) at RBS, was called as a wit­ness by Oliver Mor­ley, a prop­erty de­vel­oper who is su­ing the bank over claims it placed him un­der eco­nomic duress and sold some of his prop­er­ties for its own ben­e­fit.

RBS de­nies the claims, which re­late to a pe­riod in the wake of the fi­nan­cial cri­sis, when the Gov­ern­ment owned more than 80pc of the bank fol­low­ing a £45.5bn tax­payer bailout.

In or­der to firm up con­fi­dence in the bank, the now-dis­banded APA in­sured more than £280bn of RBS’s bad loans. In re­turn, it worked with the no­to­ri­ous GRG to man­age how it dealt with trou­bled small busi­nesses which had bor­rowed from the bank, mak­ing sure it ex­tracted the max­i­mum value. The GRG was de­signed to help busi­nesses which had fallen into trou­ble, with a view to res­cu­ing them. But RBS doc­u­ments shown in court de­scribe GRG as a ‘profit cen­tre’, and Mor­ley claims the group wrung busi­nesses like his for cash for the bank’s ben­e­fit. Ques­tioned in the High Court yes­ter­day by Mor­ley’s lawyer Hugh Sims, Sach said the APA pushed for cus­tomers’ build­ings to be trans­ferred to

RBS’s prop­erty di­vi­sion to be sold for the bank’s profit. And Sach con­firmed that the APA had very little con­sid­er­a­tion for small busi­ness own­ers whose lives’ work was, in some cases, de­stroyed by GRG ac­tions.

Sims asked: ‘You’ve gone on the record as say­ing that your per­cep­tion of the APA at this time was frankly that they had no in­ter­est in cus­tomers at all.’

Sach agreed. He said the APA would have the fi­nal word in any de­ci­sions, with the ob­jec­tive of ‘max­imis­ing value’. Sach said: ‘It was clear that over­rode ev­ery­thing ex­cept the rule of law.’

How­ever the former banker later tried to back away from his im­pli­ca­tion that GRG was forced by the agency to put money-mak­ing ahead of res­cu­ing busi­nesses.

He said: ‘We re­sisted where we thought that they were get­ting it wrong and gen­er­ally speak­ing, com­mon sense and our view pre­vailed.’

Sach said the huge growth in busi­ness cus­tomers to be­tween 10,000 and 12,000 in 2010 put huge pres­sure on GRG, which was man­ag­ing around £70bn of as­sets. The trial con­tin­ues.

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