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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– Coincidence ?? Yeah, sure. And I was born yesterday, right ?
Wasn’t there a Robo-signing scandal in the US as well during the great “ recession”? Nothing these crooked bankers do surprises me anymore to be honest
Much of the robosigning was central to a few firms in Florida (which all the major banks used…so not trying to free the banks of the obvious fraud)…which set up a number specialized courts to hear all the complaints related to the various mortgage frauds. However, they also packed the judges in those special courts with corrupt and/or lazy individuals which only rarely were willing to accept consume proofs of robosigning. Even when proof was offered….the court judges ignored it given the speed at which they were required to clear their dockets (due to the sheer volume of problem cases).
The whole think was an official whitewash….much as they are trying to do for RBS….
Not in the least surprised by any of this.
At Bear Stearns, I briefly worked for a research analyst who had been publicly accused of plagiarizing another analyst’s research. Some years ago, I saw him being interview on the business news. He was then a big deal at RBS in Connecticut.
It was 14 months of looting between Bear Stearns and when the monoline insurance industry started ” impairing” shadow banking?
ALL of this kind of corporate corruption is caused by just one thing, governments considering corporations as “individuals.” This gives the human individuals within any corporation virtual cart blanch to commit any crime they want knowing they’ll never be punished individually, only the corporation will be fined.
Until the laws are changed so the individuals who actually commit the crime are punished, corporate corruption will remain the norm, which is exactly what both the business community and politicians want.
Now that you mention it Where the heck is Jon Corzine?
It is very difficult (not impossible) to convict an individual RBS bank manager of a crime, and this has absolutely nothing to do with considering a bank to be “an individual”. The difficulty is the direct consequence of long-standing protections built into criminal law.
However, is is much easier to convict a bank of being a criminal enterprise. US regulators have the authority to invalidate the banking license & resolve the bank. This should mean retail branches & staff are sold to one (or more) healthy & non-criminal banks, thus protecting most lower level jobs.
RBS has about 95,000 employees; regulators have the authority & should ensure the top 1,000 or so executives lose their jobs as the bank is shut down underneath them..
RBS is a poster child of banks that got QE instead of bankruptcy.. took £45 million from taxpayers then wangled a further £45 mill. They are mega criminals who are above common law..
Correct As Gabe Zolna always says “Who you gonna go to”?
$45 million is a pittance (only in the Banksters alternate universe) .
Might it not have been Billion with a ¨B¨ ?
For working stiffs like me, the difference is merely semanticai and theoretical, but the Banksters laying waste to 45 BILLION is real news. 45 MILLION not so much.
Desmond meant 45 Billion (1000 X as much as 45 Million…)
I can remember a time long ago now, RBS represented prudent and safe lending.
How far it has fallen since then!
Indeed. Three decades ago we used to joke that just having “Scotland” or “Scottish” in the name of a listed bank or insurance company would add two to three percent to their market cap, purely for the reasons of prudence that you mention.
Now, pfft. Gone in one generation. Proving again the inverse relationship between short term executive bonuses and long term corporate performance.
Well that’s true of all banks…but when unbridled greed and deregulation of the ‘wealth creators’ (ie those who create only debt and then take interest from it) came a-knockin’ in the go-go 80s, things got cancerous.
Personal qualities such as prudence, forbearance, modesty, morals and integrity became for ‘losers’; and that was and is reflected in business practices.
Now it’s about [mostly] usurious lending for biggest-possible short-term gains.
What use to be illegal yesterday is now perfectly legal today. The banks simply got the government to change the laws to make this type of behavior legal. Example; it is now perfectly legal for Banks to “bail-in” their customers should the bank need the money no matter the reason why the bank needs the money. Sad.
*“Rope: sometimes you just have to let customers hang themselves.”*
And by that we mean:
“We will give customers a rope they didn’t ask for while pretending they did so we help them to get hanged.”
And of course:
“Is only cheating if you get caught.”
And don’t forget:
“You are a small fish, we are a big fish, you don’t want to get eaten, do you? Then help us to steal food from other small fishes.”
And lastly:
“Remember that more damage can be done out of ignorance and negligence than out of true nefarious purposes, if our clients don’t notice we are charging them money for services they didn’t ask for, is their problem.”
RBS balance sheet is down to 750 billion from 2 trillion. Branches closing, headcount reducing massively, lost their competitive edge to their rivals. The only way is down. GRG from a personal point of view it’s took 4 years for this report to come out. FCA should be disbanded.
This practice of pushing (small) business customers over the edge for quick profits is also a hallmark of australian banks, and probably banks all around the world. There have been a few scandals reported in the australian media, which I won’t name here. Very often the business liability (loan/overdraft) is secured against the home(s) of small business owners or directors. In fact, a certain bank in Melbourne offers their default business bank account with *mandatory* unlimited overdraft facility: you can’t turn it off. When I phoned them and asked about whose liability it would be if some nigerian prince hacked your account and transferred hundred of thousands of dollars overseas, they eventually admitted (after much questioning) that the business would be liable. In the case of small business, they would also go after the owners (who probably signed some sort of debt guarantee to open the account). Personal customers have much greater legal protections, but (small) business customers are left to fend for themselves. The moral of the story is that you should only be using cashflow to fund modest and sustainable growth. If you go to a bank for a business loan, then you are gambling that they won’t screw you and that your business bet is a good one. Both of those assumptions are very naive at best. You may as well just go to a casino as you will have much better odds of not getting screwed there.
Are these the same Australian banks which are still fueling the real estate bubble in and around Melbourne and Sydney?
Because if that is the case I am sure they apply different standards to different customers.