RBS share price dips as Tyrie suggests new grilling over GRG scandal
Andrew Tyrie, the most recent chairman of the Parliament’s Treasury Select Committee and the Tories’ candidate for Chichester in the upcoming general election, voiced “extreme concern” about new information on Royal Bank of Scotland Group’s (LON:RB)’ alleged practice of forcing small businesses into default, and suggested that the new Committee should return to the issue.
RBS’ share price had inched 0.28 percent lower to 334.38p as of 08:06 BST today, underperforming the blue chip FTSE 100 benchmark which had gained 0.02 percent. RBS’ stock has lost more than 15 percent in the year-to-date, but is up about three percent on an annual basis.
RBS’ Global Restructuring Group (GRG), a business created to assist troubled small- and medium-sized companies, has been under investigation by the Financial Conduct Authority (FCA) on allegations that it deliberately forced companies to foreclose, in order to seize lucrative assets for a low price and prop up its books.
The bank faced a parliamentary grilling last year on the issue, but the scandal has now re-emerged, following an investigation by The Times, which concluded that the bank had mislead lawmakers. Law firm Clifford Chance, commissioned by RBS to look into the allegations, said in a report that GRG customer defaults would increase the risk-weighted assets (RWAs) of the bank. The Times notes that defaulted loans in fact do not attract RWAs.
Clifford Chance denied that the mistake had made the report misleading but conceded that it should have used the word “distressed” rather than “defaulted”.
“It would be extremely concerning if RBS had misled the Treasury select committee on this important issue [RWAs], coming after their obtuse evidence in July last year,” Tyrie said yesterday as quoted by The Times. “No doubt, whatever its composition is, the committee will want to return to this in the forthcoming parliament.”
This is the second time RBS is facing allegations of obstructing the parliamentary investigation into the GRG scandal. Back in July, the lender apologised for providing misleading evidence to the Treasury Select Committee, after Tyrie accused RBS executives of being ‘wilfully obtuse’.
“Anybody can make a simple mistake in their evidence,” Tyrie told the bank last year.“But this was more than that – it was materially incorrect on a crucial point and unacceptable.”
Meanwhile, the alleged victims of RBS’ GRG practices have pooled resources into the RBS-GRG Business Action Group, with the aim of suing the lender for compensation based on an “Unlawful means conspiracy” by RBS-GRG against its customers. The Group says that “any legal action taken will be done on the basis which maximises returns for our claimant members”.
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.
As of 09:04 BST, Wednesday, 06 May, Royal Bank of Scotland Group share price is 334.20p.