The bailed-out megabank hasn’t had a year in the black since 2007.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Two weeks ago, UK mega-lender Royal Bank of Scotland (RBS) was accused by whistle-blowers of systematically forging customer signatures — that it had indeed trained staff to forge customers’ signatures — which elicited furious denials from senior management. But as we warned at the time, if irrefutable evidence emerges of forged documents, not only will management have to walk back those denials but the bank, which has already cost taxpayers €90 billion in bailouts, losses, fines, and legal fees, could end up facing yet another round of costly legal action.
That process has already begun. Now the bank was forced to apologize after retired teacher Jean Mackay came forward with paperwork that clearly showed her signature was forged on a bank document.
Some years ago the great-grandmother discovered she was being charged a fee for payment protection insurance (PPI) even though she had declined to sign up for the rip-off product when she applied for a credit card in 2008. When Mrs Mackay later confronted the bank, staff showed her a document purporting to show she had indeed agreed to the fees. But two signatures on that document – one agreeing to take out the credit card, the other apparently signing up for PPI – are notably different.
The bank refused to admit any wrongdoing although it did agree to refund her fees as well as £12 in interest. For Mrs Mackay, that was not enough. She wanted an apology and admission of guilt from her bank.
Now, years later and with the public’s attention fixed squarely on RBS’s forgery scandal, she’s finally got it. A graphologist recently confirmed that the signatures on the document are indeed “not a match.” The bank’s response was immediate: it apologized to Mrs Mackay and offered her a whopping £500 in compensation. It also admitted committing forgery but claimed it was an “isolated incident.”
Naturally, the lender hopes the scandal ends there, with a £500 pay off, but it could very easily snowball. A campaign group fighting to expose financial sector abuses already pledged to raise Mrs Mackay’s case in the House of Commons. If enough people come forward with further evidence of forged signatures, RBS will eventually have little choice but to admit that the whistle-blowers’ accusations were true.
The embattled lender is also the target of a parliamentary inquiry over its mistreatment of small firms in the wake of the financial crisis. Rather than helping to turn compromised business customers around, the bank’s Global Restructuring Group did everything it could to push them over the edge in order to raise quick funds. A month ago a government inquiry into the scandal published a tip sheet written by a GRG manager that included points such as “Rope: sometimes you just have to let customers hang themselves.”
The scandal has not just damaged RBS’s already tattered reputation; it’s also caused embarrassment to the Financial Conduct Authority, the UK’s financial services regulator, which for years tried to hide the damning findings of a probe it performed into the GRG unit. But last week the report was leaked and its findings were splashed all over the Internet — leaving the regulator with egg on its face and former RBS bosses in the spotlight over their role in the scandal.
On Friday, RBS will report its financial results for 2017. Like other of big UK banks, it is expected to suffer a bad-debt hit from the recent collapse of infrastructure giant Carillion. It also faces looming litigation costs over its “misselling” of toxic mortgages in the run-up to the financial crisis. As the Telegraph reports, whether or not RBS makes a further provision for this fine – which is expected to be more than £4.3 billion – could mean the difference between a first net profit since the financial crisis or a tenth consecutive annual loss.
That’s right: RBS has not finished a single year in the black since 2007. Since receiving a £45 billion bailout 10 years ago, at the very beginning of the financial crisis, the bank has consistently racked up further losses, amounting at last to some £58 billion. With taxpayers now owning a 72% stake, their part of the losses amount to £42 billion — meaning that the total cost for taxpayers of RBS’s disastrous lending, over-paying for takeovers, fines and legal bills is almost £90 billion.
While there are rumors that the bank may put an end to its dire run of annual losses, its management is downplaying the prospect — a wise ploy given its current woes, says Michael Hewson, chief market analyst at CMC Markets. “The bank may choose to set aside further provision to help cushion the final settlement into next year’s numbers, with the fine rumored to be in the region of $10 billion.”
Most of that will be paid by UK taxpayers, some of whom were also victims of RBS’ relentless crime spree. For the government, each new scandal saps value from the bank it hopes to re-sell one day. It already faces losses of £26 billion on its “investment” and the forgery scandal is only just getting started.
Its costs could be even greater than all of RBS’ other scams and scandals, for this is a crime that everyone up and down the country can understand. As Mrs Mackay told the Scottish Mail on Sunday, “If I had forged my name on something, it would be a police matter. They should not get away with doing things like that to people who are trusting them.” Never a truer word said. By Don Quijones.
It’s not just RBS. Barclays faces a criminal trial in the UK. Read… Another Big British Bank Lands in Deep Trouble
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