Royal Bank of Scotland Group Plc (LON:RBS) was pressured to strip companies of their assets to improve its balance sheet, The Times has revealed. The news comes as the lenders Global Restructuring Group (GRG) is being investigated amid allegations that it deliberately pushed small businesses to default.
RBS’ share price has not been impacted by the report in early morning trade, having added one percent to 343.20p as of 08:04 BST. The shares are slightly outperforming the benchmark FTSE 100 index which currently stands 0.56 percent higher at 7,025.17 points.
The Times reported today that RBS’ GRG, whose purpose was to assist companies that were having difficulty meeting their debt obligations, was given a remit by the part government-owned lender’s management to focus on reducing exposure to businesses which had badly affected its capital position. The move was in response to pressure from regulators and politicians. An investigation by the newspaper revealed that GRG could achieve a benefit to its core tier-one capital – the basic measure of bank safety, crucial for passing regulatory stress tests – when defaulting high-risk but performing customer loans.
GRG is already subject to a Financial Conduct Authority investigation following allegations that the bank had forced small company clients out of business in order to acquire their assets on the cheap. The allegations were made in a report by Lawrence Tomlinson, an adviser to Business Secretary Vince Cable, and focused on RBS’ GRG unit. The Times quoted the Serious Fraud Office as saying that it was “monitoring developments” around the division.
Last week, RBS released its first-quarter results, booking further £856 million to cover costs for past misconduct. The provision resulted in a £446 million quarterly loss for the blue-chip lender.