Tape recording reveals how RBS bullies small firms

November 30th, 2013 [minor edits February 17th, 2014]

The recording below gives a fair impression of the bullying methods deployed by RBS and its “restructuring and recovery” division, Global Restructuring Group, to extort money and impose crippling additional costs on its business customers. The critical point here is the main reason that Trihealth is struggling is that the Lancashire-based chemists’ chain was sold two interest rate swaps by RBS. These complex derivatives drained £1.2m out of the business. But the menacing GRG managers you hear on the recording are one hundred per cent in denial about this. The Mail on Sunday has a good article on this.

The commentary comes from Harry Wilson, banking editor of the Daily Telegraph. Published in the Telegraph on 25 November 2013

St Helens-based pharmacy operator Trihealth is not quite dead, but its co-founder and director Mark Addison is close to throwing in the towel in after fighting Royal Bank of Scotland for three years to keep the business alive.

Put under the control of RBS’s global restructuring group (GRG) in October 2010 after breaching an RBS overdraft limit, Mr Addison says he has reached the end of his tether.

“We had been hovering around our overdraft for some time when they finally put us into GRG, but what has followed has been appalling,” he says.

Trihealth’s story is a familiar tale of a business that prospered in the years of plentiful credit only to come unstuck five years ago. However, Mr Addison’s feelings go beyond mere bitterness; he claims the bank actively contributed to the collapse of the business.

“Turnover has dropped 70% since we were put under GRG as they have starved the business of cash,” he claims.

Once the company was deemed to be in distress it proved diffficult and expensive to secure more funding; on a recent conference call, Mr Addison was told by a member of RBS’s local GRG team that they would only consider offering a further lending facility, if presented with an independent report on the business’ future funding. But it would have to be carried out by an approved accountancy firm at his expense.

In its three years under GRG, the company claims to have paid £130,000 in fees to GRG, including a £1,000 monthly charge, £70,000 in invoice financing, £50,000 for an outside turnaround adviser, £12,000 in valuation fees and £40,000 in additional interest payments. It has an outstanding interest rate hedging product that has so far cost about £700,000.

…With government support and encouragement, Stephen Hester undertook to cut back any risky exposure on the bank’s balance sheet with little consideration for the niceties of business etiquette.

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Posted by Ian Fraser on Nov 30 2013. Filed under Blog. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry