Monday, 25 November 2013
Vinc Cable refers RBS - the first of many?
Well, RBS's scandals seemingly never end. Many of its traders are caught up in the ongoing LIBOR scandal, there is the FX scandal to come and the FT has reported RBS traders may be endangered. And now over the weekend Vince Cable has referred another report to the FCA which alleges that the RBS GRG unit (its restructuring business) has purposely put small firms out of business in order to make money by obtaining their assets on the cheap.
Now this seems a little far-fetched to me in the round. A bank lends money to a customer who can no longer pay, the bank claims assets, probably to a lesser value than the loan, but at least gets some money in. Yes, this is a remedy and potentially if you managed to time property acquisitions of this nature to the bottom of the market there is an upside- but as an overall strategy it is ludicrous. You have to make bad loans in the first place to make it work - any bank that did this would go bust....ah, hmm, I see the problem now.
Still, who can trust RBS - I attach a small diagram, hand drawn, which is a useful guide from a few years ago of how the defunct FSA may have viewed the various major UK retail banks. A one could guess from this, RBS will always be the first one up before beak on account that it is more exposed than the other institutions culturally (though that has changed) and systems wise in terms of exposing any mistakes or wrong-doing.