Bailed-Out RBS Systemically Forged Customer Signatures: Whistle-Blowers

Yves here. UK journalist Ian Fraser, who has sometimes worked with our Richard Smith, has been dogging scandals at RBS for years. As bad as bank misconduct in the US has been, RBS institutionalized larceny in a manner that is arguably unprecedented in a major institution. From a 2016 post, RBS Looted Small Business Customers, Deliberately Driving Thousands in Bankruptcy, While Under Government Ownership:

BuzzFeed and BBC Newsnight, building on the work of Ian Fraser in his book Shredded, who have been dogging the fraudulent activities of the Royal Bank of Scotland, have documented how a RBS loan workout unit, the Global Restructuring Group systematically seized assets from small business customers, including deliberately forcing them into bankruptcy, with the cooperation of senior levels of the bank. The opener:

The Royal Bank of Scotland killed or crippled thousands of businesses during the recession as a result of a deliberate plan to add billions of pounds to its balance sheet, according to a leaked cache of thousands of secret documents.

In the UK, bankruptcy means liquidation, and RBS would use its control over the auction process to make sure it would pick up assets at bargain prices and dispose of them for a tidy profit. Here are the main charges, from BuzzFeed’s overview:

  • RBS managers encouraged employees to hunt for ways to boost their bonuses by forcing customers into loan restructuring in order to extract heavy fees as part of a profit drive nicknamed “Project Dash for Cash”.
  • Firms that had never missed a loan payment were pushed into GRG under the bank’s secret policies for reasons that had nothing to do with financial distress, including for telling RBS they wanted to leave the bank, falling out with managers, or threatening to sue over mistreatment.
  • Once in GRG, firms were hit with crippling fees, fines, and interest rate hikes that could run into seven figures, helping to net the restructuring unit a profit of more than a billion pounds in a single year.
  • Contrary to claims by the bank, there were no Chinese walls between GRG and West Register bosses, who sat together on both the controlling committee that held sway over which businesses were transferred into the restructuring unit and the property acquisition committee that signed off the bank’s bids for their distressed assets. Auditors repeatedly warned about perceived conflicts of interest in GRG.
  • The property division, which amassed assets worth £3.3 billion during the crisis, was passed information that was not available to other bidders when it wanted to acquire properties from businesses in GRG. In contrast to what RBS executives told parliament, properties could be sold to West Register without being advertised on the open market.
  • Staff were told to conceal conflicts of interest from customers when demanding cheap shares in their businesses or stakes in their properties.

I’ve never seen such a cynical, large scale exercise in orchestrated pilfering at a regulated financial institution before. GRG dealt with over 16,000 companies, and the article states it put thousands of them under, many of them for profit rather than out of necessity.

Now to the latest sighting of sordid RBS conduct….

By Don Quijones, of Spain, the UK, and Mexico, and editor at Wolf Street. Originally published at Wolf Street

The Royal Bank of Scotland, the UK mega-lender that has already cost British taxpayers over £90 billion in bailouts, losses, fines and legal fees, could be about to face its biggest scandal yet following allegations staff were routinely “trained” to forge customer signatures.

First, managers were taught how to fake the names on key customer documents, according to whistle-blowers at the bank, cited by the Scottish Mail on Sunday. Staff were then allegedly shown how to download authentic signatures from the bank’s online system, trace them on to new documents by holding them against a window and to photocopy the paperwork a number of times, to “obscure the image somewhat” and thus avoid detection — a blatantly criminal practice that allegedly became commonplace throughout the bank to speed up processing.

The latest allegations are further confirmation of just how poisoned a legacy the pre-crisis management team left behind at the bank. Obsessed with achieving rapid growth at just about any cost, executives “bred a culture of impunity that affected most aspects of [RBS’] business,” says British financial journalist Ian Fraser.

Fraser was one of the first journalists to expose how some of the bank’s employees edited minutes of telephone conversations with customers to avoid the bank having to shell out compensation for misselling insurance products. At one point as many as 1,000 employees at RBS’s investment banking division (nearly a tenth of its back-office staff) were solely engaged in data-clean up and reconciliation — i.e., doctoring or recreating documents, such as loan and derivatives contracts, in ways that suited the bank and often undermined the position of counterparties. 

It was small business customers that suffered most at RBS’ hands. The bank’s Global Restructuring Group, which was supposed to help turn compromised business customers around, did everything it could to push them over the edge in order to raise quick funds during the financial crisis. Two weeks 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 GRC deliberately “knee-capped” business customers they didn’t particularly like, through various techniques such as phony valuations or misselling them deadly interest rate swaps, so that the bank could pretend they were in breach of conduct, says Fraser. Then, as a favor to a larger company it valued much more, the group would sell it the smaller company or its remaining assets at a discount and pocket the change. In this manner the group is alleged to have wiped out thousands of smaller companies at the height of the financial crisis.

Top executives at the bank say they will “no longer fight” the conclusions and recommendations of the government’s “withering” independent review of mistreatment of small business customers by the bank, the FT reports today. In other words, the senior bankers finally admit that the bank defrauded its small business customers.

For the moment the same executives deny any systemic document tampering. But if irrefutable evidence emerges, they may be forced to walk back those denials, too. And a fresh new round of legal action can begin.

The latest allegations of fraud could turn out to be the tip of a very large and dangerous iceberg, Fraser warns. If the practice of forging signatures was as widespread as the whistle-blowers contend, there’s a risk, albeit small, that a court will decree all contracts between RBS and its customers null and void, which could tip the lender over the edge. Such an outcome may seem preposterous, but so too was the notion that a high street bank would systematically forge its customers’ signatures. Until today.

Arguably the biggest tragedy in all of this, besides all the small businesses wiped out by the bankers’ greed, is that the worse the RBS saga gets, the more expensive it becomes for British taxpayers, almost none of whom had anything to do with the bank’s fraudulent practices. Some taxpayers were even victims of the fraud yet still have to help fund the bank’s continued survival, which is getting more and more costly as time goes on.

The British State owns 81% of RBS. Since receiving a £45 billion bailout 10 years ago, at the very beginning of the financial crisis, the bank has racked up further losses of £58 billion. With taxpayers owning an 81% stake, their part of the losses amount to £47 billion — meaning that the total cost of its disastrous lending, over-paying for takeovers, fines and legal bills actually tops £90 billion. With little sign of RBS turning an annual profit any time soon, the accumulated losses are expected to continue to grow while doubts still remain about just how accurately RBS prices its assets.

RBS’ ongoing trials and tribulations are a stark reminder of just how little road has been traveled since the last financial crisis and how deeply vulnerable the UK’s banking system — and with it, the broader economy — remains to another downturn, just at a time that the potential warning signs of another crisis are beginning to flash. By Don Quijones.

“Not another Carillion,” said the UK government to soothe frazzled nerves, as an entire industry is teetering. Read… Crash of Outsourcing Giant with 70,000 Employees Globally Sparks New Panic

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  1. Thuto

    Until the evidence starts mounting on the document tampering allegations, cue the usual script of brooms coming out to sweep this whole affair under the carpet, the PR department issuing statements “rejecting these spurious allegations with the contempt they deserve” and denouncing whistleblowers as “disgruntled ex-employees”. If the evidence mounts high enough, the higher-ups will claim “shock” at how this could have been happening right under their noses, will be hauled to a parliamentary inquiry a la Carillion in the UK and Steinhoff here in SA, parliamentarians will get their 15 minutes of fame grilling those they’d normally swoon over and said higher ups will be back home in time for dinner. What’s not to like…

  2. cnchal

    At one point as many as 1,000 employees at RBS’s investment banking division (nearly a tenth of its back-office staff) were solely engaged in data-clean up and reconciliation — i.e., doctoring or recreating documents, such as loan and derivatives contracts, in ways that suited the bank and often undermined the position of counterparties.

    Each one knew what they were doing was criminal, yet followed orders from their bosses without fail. That should bolster their resume!

    Any involved bankster going to prison for a few decades, or even a few days? No, even though thousands were involved in the criminal enterprise.

    Do the involved banksters get to keep their salaries paid and “performance” bonuses? Of course, they were just doing their jawb.

    Did government officials know, and turn a blind eye or encourage this criminality? My bet is absolutely yes.

    The courts are just as corrupt and there will be no justice.

  3. paul

    These banks were seen as institutions before the crash. I’ve met a few that worked there over the years and,even now, they are still believers; assigning the troubles not to the institution but anything else.
    The most senior, and the biggest shit, now offers moral guidance as an ordained minister.

    Some judicious creative destruction would have gone a long way, but the policy response; to be an iron lung for the carcass and an iron heel for the weakest outside the castle walls, has only,as the continuing abuses show, made things worse.

    1. Adam Eran

      Evil is often deceptive. Lucifer was not ugly, but the most beautiful of angels. Satan is the father of lies. The really evil stuff is seductive, attractive, and often the paragon of “respectability”… you know, like those bishops with tastes for little kids…

      I don’t know what gets into lenders, but I worked for a couple of them…both criminals. I don’t mean loan fraud (although I doubt they’d be above that), I mean statutory rape and larceny.

      It’s not just RBS.

  4. perpetualWAR

    I wonder if RBS’s CEO will pull out his Scotland Yard cufflinks prior to his testimony before Parliament?

    Or maybe Downing Street gives out cufflinks?

    1. Conrad

      If they’re willing to forge customer signatures on an industrial scale I’m sure they’d have no problem perjuring themselves to wriggle out of any prosecution.

      Not that that should stop the relevant authorities from at least trying to do their jobs of course.

  5. JBird

    I’m not worry about the ghouls at RBS, as much as I am worry about faith in the system because all this including (especially) the mass forging and falsification of records destroys trust in the whole system; I have the same feelings about the FBI, NSA, and CIA repeatedly destroying their records despite orders by both Congress and the courts then obviously lying about it.

    It is the trust, or at least faith, in a society’s institutions that make it work, not the enforcement of the actual rules.

  6. Exlcus

    Thousands of people involved in institutional fraud and covering it up. And no justice ever for the victims.

    And people laugh at conspiracy theories and say, “Oh, too many people would have had to know about it and stay silent, it’s not possible.”

    Look, I’m not religious, but at some point society is going to get what it deserves unless a LOT of people find some ethics fast. I mean, the social contract is completely blown out of the water at this point.

  7. zapster

    Why would a government-owned bank be seeking profits in the first place? Is this another neoliberal privatization thing?

  8. Stephen Masters

    The time has come for statutory and regulatory authorities to actually do their job and administer the licenses under which banks operate by actually using the power they have. In Australia Greg Medcraft recently retired Chairman of ASIC (Australian Securities and Investments Commission) when talking about Australian bank conduct described Australia as a “…a paradise for white collar criminals.”
    A banking license can have conditions attached and be reviewed – and even cancelled – if there is any hint of misconduct, however, with secondments and other forms of exchange of staff between the banks and the regulators, as well as confused loyalties and security of employment issues, duties and responsibilities have become obscured, if not obliterated completely. Ethics don’t get an mention. A reasonable person can now say supported by mountains of evidence – given a daily diet in the media of bank scandal upon scandal – that the authorities responsible for regulating banks have been captured, compromised and corrupted. This is not only a public interest issue but also a national interest issue. Regulatory inertia and government blindness now mean that there are numerous examples of banks being completely out-of-control. These banks rely upon/ have gambled upon government bail-outs and bail-ins if problems they create get out-of-their-control. Thus bank licenses are a license to print money with a government guarantee. Not bad. Disruption is here and the party will not last with all this definitely ending in tears. Apart from the astronomical amounts of money stolen from investors, and the indescribable pain and suffers caused, there is nothing illegal here. They describe it as risk; other peoples risk. No one will be incarcerated. What will remain is retired bankers in foreign locations sipping cocktails for breakfast reading about their investments in disruptive financial services technologies and annoying their partners with parrott-like repeating of the secret bankers joke about dealing with other peoples money: “Thank God it’s not my money!”

  9. michael butcher

    “Look, I’m not religious, but at some point society is going to get what it deserves unless a LOT of people find some ethics fast. I mean, the social contract is completely blown out of the water at this point.”


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