RBS carried out “largest theft anywhere, ever” by its actions over struggling firms, MP’s hear. 19th January 2018

19th January

ROYAL Bank of Scotland’s treatment of small businesses may be the “largest theft anywhere” as it carved up firms like a “Sunday roast” because they wanted to move or make a complaint, MP’s have heard.

The lender’s controversial global restructuring group (GRG) was “more like an abattoir” where firms were taken apart as part of an “intended and co-ordinated strategy” to raise funds.

The GRG was set up as the bank’s turnaround unit for struggling businesses but was disbanded in 2014 amid allegations of grievous customer mistreatment.

READ MORE: Investors suing bank claim ‘failing firm’ policy came from RBS bosses

RBS has already put aside £400 million to compensate customers and launch a new complaints system relating to “complex” fees and dealings with its debt restructuring unit between 2008 and 2013.

But MPs are now calling for criminal charges to be brought against the bankers at the unit which had 12,000 small businesses as clients at one point, with most going on to be liquidated.

Yesterday, the GRG was widely condemned in a House of Commons debate which called for an independent inquiry into the treatment of businesses by all financial institutions.

Shadow Treasury Minister Clive Lewis said: “We do know that 90 per cent of GRG administered businesses never made it back to mainstream banking. This is a very high proportion.

“The cost of this is immeasurable, but we believe it to be in the tens of billions. So let’s be clear here. This is the potential size of the injustice that has taken place in our country.

“If it is this big, it may be the largest theft anywhere, ever.”

READ MORE: Investors suing RBS claim ‘killing floor’ policy came from top bosses

MPs also heard that businesses were “carved up like a Sunday roast” and only placed in GRG because they wanted to move banks or had made a complaint.

Mr Lewis added: “This was meant to be somewhere where they were put back to try to get them into a situation where they would come back as a viable business. Actually, it was more than an intensive care unit, it was more like an abattoir, where they were actually stripped and taken apart.”

Ahead of yesterday’s debate the Treasury Select Committee published a memo sent to GRG staff in 2009.

It told staff that “sometimes you need to let customers hang themselves”, under the heading “rope”.

Tory MP and committee chairwoman Nicky Morgan said the memo “lifts the lid on a culture at RBS”.

The bank admitted in November 2016 it “did not meet the standard it set of itself which impacted on how it treated some of its SME customers”.

It followed the City watchdog’s publication of an initial summary of a report into the activities of GRG between 2008 and 2013.

Analysis: Fresh focus inflicts further damage on bank’s already battered image

RBS was accused by the Financial Conduct Authority of “systematic” failings at its GRG which led to the mistreatment of thousands of small business customers.

The bank said as many as 4,000 of the 12,000 customers transferred to the bank’s GRG unit between 2008 and 2013 are eligible for compensation.

Shadow business minister Bill Esterson said: “There are many … who believe criminal investigations to be the appropriate way forward at RBS GRG.”

Treasury Minister John Glen said he will “stop at nothing” to help small and medium-sized businesses “failed” by RBS and others.

He said: “I want to be really clear that in doing this job, in addressing the issues raised in the House today, that I will stop at nothing to improve the situation that we have had to date.”

Derek v Goliath; a shocking tale of bank bullies & their legal protectors February 8, 2017

Business Economy Investigations News
Derek v Goliath; a shocking tale of bank bullies & their legal protectors
February 8, 2017 Iona 3 Comments
PIC: Derek Carlyle outside RBS

Iona Bain

When it comes to David and Goliath battles involving banks, there is usually only one winner.

But the curtain has just come down on a 10-year morality play which saw property developer Derek Carlyle bankrupted, lose his house, be castigated in the press and given a record 12-year bankruptcy restriction order….then this week, two years after an extraordinary victory in the land’s highest court, receive a seven-figure damages settlement from taxpayer-owned Royal Bank of Scotland.

Derek’s case was highlighted for five years by Simon Bain, The Herald’s award-winning business correspondent and personal finance editor until he retired six months ago and began working for the Young Money Agency and this blog.

The Herald reported how Derek and his lawyers fought back against what his MP called a “personal vendetta” by bankers in the notorious RBS Global Restructuring Group, which was subsequently to be investigated by Parliament.

The campaign also put the spotlight on how banks can normally rely on Scotland’s legal system for support, with solicitors unwilling to act against them, and sympathetic judges.

How Derek Beat Goliath

Simon Bain

In March 2010 I was invited to the offices of a small law firm to hear about their cases involving small businesses and banking.

In 20 years writing about customer disputes with banks, this was a first – lawyers taking on the banks? Surely not!

But partner David Calder and associate Cat MacLean at MBM Commercial told it how it was – and it wasn’t pretty.

They were acting for a series of entrepreneurs with serious complaints about commercial bullying bordering on the vindictive – by the state-owned Royal Bank of Scotland.

What grabbed my attention was when they said most law firms would not act against banks. I later called a friendly lawyer or two, who confirmed that “conflict rules” prevented most of Scotland’s bigger firms from acting against the big banks.

MBM had won an important victory in the Court of Session in January 2010, defending a £2m claim by RBS against property developer Derek Carlyle for an unpaid debt.

Lord Glennie upheld Carlyle’s defence that RBS had reneged on a promise to lend him £700,000 to complete a housing development, opening the way to a £3m counter-claim by the developer against the bank.

It was an unexpected blow to RBS, which had taken extreme measures to ensure that its customer of 20 years standing would not be able to stand up against them in court.

Plans to “destroy” Carlyle

The bank’s tactics were revealed by Carlyle’s Lanarkshire Labour MP Jim Hood in a blistering attack on RBS in the House of Commons on 10 March 2010.

He said that in August 2008 RBS had suddenly told Carlyle to repay a £1.45m loan within 24 hours or it would “destroy” him.

“The bank’s solicitors then embarked on a series of actions that is shocking. In a short space of time Mr. Carlyle’s bank accounts were frozen, his company forced into administration, his assets seized, and action to repossess his family home commenced.

“Not satisfied with that, the bank manipulated a personal account used for school fees so that it became overdrawn, resulting in payment of Mr. Carlyle’s children’s school fees not being honoured.”

Another project was seized, and sold by the bank at less than half its previous value.

“The unjustified attack resulted in the chaos and destruction that the bank had intended, destroying the man’s business and causing horrendous damage to his personal life and reputation.

“Since the beginning of August 2008 the bank has bullied and intimidated Mr. Carlyle’s usual solicitors, threatening them with destruction of their business practice, which resulted in their withdrawing from acting for him in this matter.”

The MP said he was “horrified by the inexcusable and underhand tactics adopted, both personally and professionally”, adding: “The taxpayer should not be funding personal vendettas by bank personnel.”

RBS had been backing Carlyle and his ventures for the past 20 years. As with earlier deals, he was told on the phone by his manager in February 2008 that a deal was “all approved” and he could go ahead.

Lord Glennie agreed that the bank should have kept its promise. He accused RBS of a “lack of candour” in its evidence about what happened – judge-speak for telling porkies or, as Jim Hood suggested, “lying through their back teeth”.

After the judgement MBM Commercial was on the offensive, believing it opened the door to claims by other businesses.

Now Carlyle’s bankers in the RBS Global Restructuring Group – under investigation by the government for the past four years – were seriously angry!

RBS appeals – and engineers a record bankruptcy order

First RBS, unused to not getting its own way in court, appealed to the Appeal Court, but took its time, hoping perhaps that Carlyle would disappear before the case reached the court years later.

Next the bank was instrumental in getting a draconian 12-year bankruptcy restriction order slapped on Carlyle – a record in a Scottish court. The bank had alleged that its customer had breached an agreement in failing to hand over the £564,000 proceeds of a property sale in August 2008 (the month it pulled the plug on him) – but the bank was never able to produce such an agreement. The bank even used private investigators to produce evidence – gleefully aired in the tabloid press – that Carlyle had squandered the cash on a ‘party lifestyle’.

Finally, when Carlyle appealed to the Scottish Legal Aid Board for funding to defend himself in the Appeal Court, RBS lodged objections, hoping to finish him off.

I reported in May 2013 how the legal aid board had refused aid, but noted that Carlyle’s bankruptcy trustee had failed to disclose fully his real assets.

That morning RBS asked three judges to allow the appeal to go ahead immediately – Carlyle would have to defend himself, with no lawyer, while the bank employed the services of the Dean of Faculty, the most senior lawyer in Edinburgh. But the judges sensibly refused, asking the SLAB to investigate further.

The SLAB changed its mind and allowed legal aid. I sat in the Appeal Court for two days in July 2013, as three judges listened sympathetically to the bank’s case. A promise in a phone call could not possibly constitute a contract, the bank’s QC said. Lord Carloway, presiding, appeared to agree.

In September, the judges ruled in the bank’s favour. RBS’s behaviour may have been unethical, they effectively said, but it wasn’t illegal.

Now, surely, it was all over.

Derek fights back at the Supreme Court

But incredibly, MBM Commercial secured permission, support from the SLAB, and some private insurance-based funding, for the case to go on to the Supreme Court.

The firm’s head of litigation Cat MacLean, a judge’s daughter, had meanwhile been named ‘Solicitor of the Year’ for the firm’s campaigning activities.

And she was to win the award again after the Supreme Court in London, in March 2015, ruled that the Edinburgh appeal judges were wrong to have overturned Lord Glennie’s original judgement.

Derek had beaten Goliath, despite Goliath fighting dirty. The bank dug in for a final round, taking two years to agree a settlement of his £3m claim for damages. This week RBS said ‘the bank and Mr Carlyle are pleased that they have been able to agree terms of settlement’.

The case has cost the taxpayer up to £4million. As far as we know, the bankers behind the campaign of vengeance are still working inside the bank.

Intriguingly, Carlyle’s QC has said the landmark Supreme Court result might not be easy to repeat, as it went against the grain of Scotland’s legal system.

Scottish courts “protective” of banks

I reported in 2015 how Roddy Dunlop QC told a conference staged by MBM Commercial that public disquiet with bankers tended not to be matched by the Scottish courts, which had appeared “protective” of banks.

He warned that in Scotland there would soon be no automatic right of appeal to the UK’s highest court. It could only be granted by the appeal court itself headed by Lord Carloway. “You (now) have to go to Lord Carloway to ask his permission to appeal against one of his decisions,” the QC said. “It may be that there is an attitude that makes it more difficult to rely on cases such as this, we will have to wait and see.”

It is not an isolated case.

Lawrence Tomlinson the government’s Entrepreneur in Residence was asked by the government to produce an independent report on the Global Restructuring Group in 2013, and concluded that it had systematically destroyed thousands of small businesses. The motive, of course, was to desperately shore up the bank’s finances, which had been destroyed by the 2008 financial crash.

When the report came out, RBS called in all Tomlinson’s loans and shut all his accounts!

Last October internal RBS e-mails emerged suggesting that GRG was encouraged to ‘provoke a default’, and over 12,000 businesses suffered. Tomlinson commented: “The RBS files show the Royal Bank of Scotland, and its executives, took the opportunity to make profit from businesses in distress whilst telling them that they were there to ‘help’. Three years ago I called for an investigation into the behaviour of GRG. Since then, we have been waiting for the results of the Financial Conduct Authority’s (FCA) review.”

The regulator drags its heels

We are still waiting. The FCA is said to be about to let the GRG off the hook, claiming to have found “no evidence” of the allegations. Yet as long ago as March 2010, lawyers were telling me that here in Edinburgh, in this one small corner of the land, the evidence was indisputable.

Campaigners say the economy is still suffering the consequences, not to mention the human misery inflicted. Yet despite the Supreme Court triumph, nobody, it seems, will ever be held to account for Goliath’s reign of terror – and it was funded by you and me.


House of Commons Hansard 10 March 2010

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10 March 2010Volume 507

10.56 am

Mr. Jim Hood (Lanark and Hamilton, East) (Lab)

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I would like to draw attention to the disgraceful treatment that my constituent Mr. Derek Carlyle has received from the now publicly funded and publicly owned Royal Bank of Scotland. I first met Mr. Carlyle in January last year, when he undertook to highlight difficulties that he had encountered over the previous months in his business arrangements and dealings with the bank. I was horrified then, and I remain horrified today, by the inexcusable and underhand tactics adopted against him, both personally and professionally.

Mr. Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab)

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I congratulate my hon. Friend on obtaining such an important debate. I have been dealing with constituents facing similar problems. This week, I have been dealing with a small business man who simply cannot get access to lending to assist his trading. Given that the Government have supported the banks to ensure the recovery of the economy, is my hon. Friend not absolutely right to tell the banks that their behaviour is unacceptable?

Mr. Hood

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I thank my right hon. Friend for his intervention and I agree wholeheartedly. As I report further to hon. Members, however, he will find out that my constituent’s case is not about a guy who could not get the funding; he had been promised the funding, but it was then withdrawn.

In introducing the debate, I should say that Mr. Carlyle was an established customer of the bank and had enjoyed an excellent working relationship with it over the years. Development funding had been provided for projects that were successfully completed. In 2007, Mr. Carlyle had a solid track record, achieving an average profit margin of 30 per cent. on each project, and one project in East Kilbride was still progressing. That year, an opportunity arose to purchase and develop land in the grounds of the renowned Gleneagles hotel in Perthshire. As was his habit, Mr. Carlyle approached the bank with this new business venture, which would potentially realise substantial profit, benefiting the bank and himself.

In March 2007 Mr. Carlyle met someone from the bank’s commercial centre to negotiate funding for the project in two parts—the purchase of the land and the building development of a £4 million house. It is pertinent to note that it was a condition of the sale of the land that the plots could not be resold, and were required to be developed by March 2011, failing which the land would return to the sellers. That is what they call a buy-back clause. Because of the buy-back clause Mr. Carlyle had impressed on the bank the fact that he could not accept funding for the purchase of the land if funding for the development would not also be made available.

The bank was very enthusiastic about the project, and agreed. On the strength of his past dealings with RBS, and being confident of its support, Mr. Carlyle undertook the purchase of the land, although the funding from the bank for the purchase—£845,000 and £560,000—was not released until August 2007. Initial building works commenced, with continued assurances from the ​bank that it would support the Gleneagles development project. Mr. Carlyle had initially used some of his own funds to get the project started, and had paid off some debts, as a result of that, from the sale of another property, while also repaying some funds to the bank.

On 12 August 2008, Mr. Carlyle and his solicitors were abruptly advised that the bank would not provide the development funding, and that it demanded repayment of the £1.45 million used to purchase the Gleneagles land by 10.30 the next day, or, it said, it would “destroy” Mr. Carlyle; and it advised him that he “should be clear about the chaos that would ensue”.

David Simpson (Upper Bann) (DUP)

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I welcome you to the Chair, Mr. Howarth. The hon. Gentleman has outlined something that is an exact mirror image of what is happening in Northern Ireland, through RBS, to the Ulster Bank, where facilities that have been agreed are withdrawn at the last minute. That affects many vulnerable businesses and the people employed in those small businesses. Does the hon. Gentleman agree that what the banks say privately or publicly to the Government is not what is happening on the ground?

Mr. Hood

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That is very much the case. I thank the hon. Gentleman for making the same point that I hope to make to the House.

Mr. David Hamilton (Midlothian) (Lab)

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I know of examples in my constituency, as other hon. Members do in theirs, of companies, such as Crummock in Midlothian, that are beginning to be reluctant to discuss things, because of what the Royal Bank of Scotland has been doing. Those are long-established companies, which have had a long-term relationship with RBS, which has turned its back on them. My hon. Friend mentioned threats being made; could he give some examples?

Mr. Hood

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Yes, I certainly will, as I develop my argument.

The reason given for the action was that there had been no agreement to provide the development funding, and that all the funds from the property that Mr. Carlyle had sold should have gone straight back to the bank; the bank was not happy about that. It claimed to have an agreement that the total funds from the sale should have gone back to the bank, but since then it has been unable to produce such an agreement.

The bank’s solicitors then embarked on a series of actions that is shocking. In a short space of time Mr. Carlyle’s bank accounts were frozen, his company forced into administration, his assets seized, and action to repossess his family home commenced, with arrestment and inhibition orders from the Court of Session in Edinburgh. Not satisfied with that, the bank manipulated a personal account used for school fees so that it became overdrawn, resulting in payment of Mr. Carlyle’s children’s school fees not being honoured. Furthermore, to make things more difficult for him, the bank prevented solicitors from acting on his behalf, and it was only with the bank’s approval that his current solicitors in Edinburgh were able to be appointed.

The project in East Kilbride was also the subject of seizure and was sold by the bank at a considerable loss, of almost half its value. The unjustified attack resulted ​in the chaos and destruction that the bank had intended, destroying the man’s business and causing horrendous damage to his personal life and reputation. The bank pressed on against Mr. Carlyle through the action it had raised in the Court of Session. Mr. Carlyle counterclaimed, on the basis that the promise from the bank to provide development funding was a contractual one, and that the bank was in breach of that contract, known as collateral warranty.

The Court of Session agreed with Mr. Carlyle. The judgment from Lord Glennie of 13 January 2010 found not only that the bank had failed to keep its contractual promise to provide the development funding, but that the conduct of the bank in the Court of Session fell far below the required standards. That is strong criticism from a judge. He also said that the Royal Bank of Scotland lacked “candour” in the proceedings, specifically in its deliberate failure to admit to key evidence in the Court of Session. If someone is described in a judge’s language as lacking candour, that might mean to some of us in the House that they were lying through their back teeth.

Since the beginning of August 2008 the bank has bullied and intimidated Mr. Carlyle’s usual solicitors, threatening them with destruction of their business practice, which resulted in their withdrawing from acting for him in this matter. That is the thing that I really want to point out to the House, and to the Government. Here were lawyers—and it is the case today—having to approve the person who was representing the person opposing them. The firm of solicitors whose business was threatened with ruin was a small one, with little option but to tell my constituent, “I’m sorry, I can’t carry on representing you.”

Dr. William McCrea (South Antrim) (DUP)

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The hon. Gentleman will know that the Government are a major stakeholder in the Royal Bank of Scotland. Why does he think it is possible for officials of the bank to snub their noses in the direction not just of many Members of Parliament, and even the Government, but also the Prime Minister’s statements in this House? Surely that is totally unacceptable.

Mr. Hood

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It is absolutely unacceptable, and I hope that my brief Adjournment debate will encourage other hon. Members to find out whether, as I suspect, there are many similar examples from their constituencies, and to bring those to the House.

Mr. Alistair Carmichael (Orkney and Shetland) (LD)

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The hon. Gentleman does not only his constituent but the whole House a service in bringing the matter before us, because it is one of the most extreme examples of something that I have heard of from my constituency experience; and I suspect that just about every other hon. Member who interacts with businesses in their community will be in the same situation.

Does the hon. Gentleman agree that what has been happening is made possible as the result of a policy of RBS in particular, of removing all decision making from the local branch, the point of contact that their customers—including me—have always enjoyed, and giving it to decision makers further down the line, who can come up with reasons for refusals that hold no water?

Mr. George Howarth (in the Chair)

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Order. I remind hon. Members that this is a short debate and that interventions should anyway be brief and to the point. Long interventions prevent other hon. Members from having the opportunity to speak.

Mr. Hood

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I thank you for your guidance, Mr. Howarth.

One thing has really irked me. Another of Mr. Carlyle’s solicitors threatened by the bank found out that a letter concerning an alleged attempt to obtain substantial funds from RBS had been “concocted” by RBS staff. The solicitor threatened to report the incident to the police and the fraud office. Only then was the matter dropped. Sinister stuff.

The bank then pressed another large firm of solicitors to stop acting for Mr. Carlyle. I know which firm it was, but it would not be fair to name it at this stage; we may have to name it later, but we do not want to do so now. Mr. Carlyle was advised that no sizeable firm would act for him in a case against RBS. His current solicitors took the case only after saying to RBS, “Is it okay if we take the case?” They had to be approved by RBS before they could act. What sort of situation are we in?

The bank’s specialised lending services and recoveries department in Edinburgh delivered a one-sided report to Mr. Dickinson, the chief executive, in order for him to respond to a letter from me. Again, it was lack of candour to brief the chief executive, but I leave that to him.

In the spring of 2009, the bank falsely advised the Court of Session, the bank’s chief executive and Mr. Carlyle’s solicitors that the latter’s key witness, an RBS manager at the time, had changed her statement made in support of Mr. Carlyle’s claim, and that there was no point in going to court. That, too, was found to be completely false. Indeed, the woman in question—I have a copy of her statement with me—never made such a retraction. That was proved to be the case in evidence given to the Court of Session. That is what made Lord Glennie refer to a “lack of candour”.

Following the proof being given to the Court of Session in October 2009, and while awaiting judgment, the bank apparently conspired to influence a third party and its representatives to have Mr. Carlyle sequestrated for the small sum of £4,000, a sum unconnected with the bank. That was wrong and unfair; it was an attempt to destroy his ability to claim justice and reparation if he succeeded in his Court of Session counterclaim.

Despite admitting in court that the promise was breached, RBS has apparently decided to bring in another highly paid legal team that includes—get ready for this—the Dean of Faculty to represent it at the taxpayers’ expense, in order to examine Lord Glennie’s judgment.

The inexcusable and underhand tactics of bullying and intimidation by RBS personnel of individuals and organisations, no matter whether it is done in an uncontrolled manner or with the full knowledge and authority of the RBS directors, is wholly unacceptable. Once again, RBS personnel seem to believe that they are above the law and not accountable for their actions, and that the institution, with its bottomless pit of taxpayers’ funds, will bail them out. They had the power to bully and destroy—and to hide when caught.

Bob Spink (Castle Point) (Ind)

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The hon. Gentleman speaks of bullying smaller people and firms. May I tell the House about a firm in my constituency that had an order book of £3 million? It was owed £400,000, much of it by main contractors who were improperly withholding the money, and it owed others the lesser sum of £300,000. The banks forced that company into administration, and refused to lend to it. The banks and the main contractors cleaned up big time, and the small man was trodden all over. It is about time that the Government took action to stop such improper practices.

Mr. Hood

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I am sure that the Minister is taking on board these interventions.

As regards Mr. Carlyle, I would urge RBS—via Mr. Dickinson, its chief executive—to follow up its admission in the Court of Session that it breached its promise and honour it by providing the reparation due to Mr. Carlyle for its wrongful actions once his damages claim has been quantified. The taxpayer should not be funding personal vendettas by bank personnel; nor should RBS be allowed to wriggle out of honouring the clear promise made to Mr. Carlyle.

On a wider note, I am sure that there are many without Mr. Carlyle’s determination and strength of character who have been mistreated, bullied and intimidated by RBS. I urge them to lodge a detailed formal complaint to not only the Financial Ombudsman Service but their local MP.

I received a letter from RBS yesterday. I understand that the Minister has a copy. It was one of those “pp” letters that we see far too often; although I know where it came from, I do not know who wrote it. It contains the same stuff—I was going to say “garbage” but I do not want to be too disrespectful—but it has the same garbage that the bank presented in its case at the Court of Session, which Lord Glennie said was “less than candid”. I shall disregard much of the letter’s contents, as it contains information that we already know. However, it also includes an invite to a meeting at my constituency office to discuss this and other cases; I look forward to that.

I ask the Minister to take all this information away. I do not say that he or the Government are responsible. When I came to this debate, I hoped that we were dealing with rogue managers and rogue directors at RBS, but from the interventions that I have taken—they were from Members from Northern Ireland and from many other parts of the country—I suspect that it is even more serious. It is not rogue people: it may be institutionalised. If so, it must be sorted; and we, as major shareholders in RBS, have a duty to sort it.

11.17 am

The Economic Secretary to the Treasury (Ian Pearson)

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It is a pleasure, Mr. Howarth, to serve under your chairmanship. I congratulate my hon. Friend the Member for Lanark and Hamilton, East (Mr. Hood) on securing this debate. He is certainly right to say that bank lending is vital to business. Many businesses have continued to express anxieties and grievances on that question, and some of them were reflected in the interventions made on my hon. Friend.

As my hon. Friend noted, his constituent Mr. William Derek Carlyle has taken action on what he believes to be unfair practices. I listened carefully to what he ​said. He made some serious allegations about bullying, intimidation, and threats to solicitors and others. I am sure that he will find other avenues through which to pursue those matters. I am sure also that Royal Bank of Scotland will have listened carefully to my hon. Friend’s comments.

Mr. Hood

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I did not mention the solicitors for that reason. However, if I need to mention them I shall certainly do so. Solicitors, and groups of solicitors, need to be defended against such behaviour. Lawyers must be free to represent their clients, regardless of what has happened. This case indicates that that was not so. There may be some legal questions about interfering with due process, and we may have to return to the subject.

Ian Pearson

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I note what my hon. Friend says. He will be aware of the different routes through which he can progress these matters. He will appreciate that I cannot comment specifically on the particulars of the Carlyle case, because it is still subject to the court ruling. However, I hope to see a resolution of the matter—and, indeed, of other matters that have arisen.

I would like to address some of the broader issues about bank lending in the UK economy, and say something specific about RBS in response to the concerns expressed by hon. Members. I shall not dwell too much on the context, given the short time for my response, but it can be traced back to the reckless lending in which some in the global financial sector indulged in the years preceding the crisis. We have seen the first global financial crisis of the modern era, largely as a result of the emergence of the sub-prime crisis in the United States following the collapse of Lehman Brothers. Incredible action in the United Kingdom led to our substantial ownership of the Royal Bank of Scotland and the Lloyds Banking Group. We then took significant action to ensure continued lending, both to households and to businesses—the subject of the debate.

The latest Bank of England “Trends in Lending” report shows that net lending declined by £47 billion in 2009. That trend is not just relevant to the United Kingdom, but common to the United States, the eurozone and Japan. As the Bank’s analysis has shown, during past recessions and financial crises, bank lending typically remained weak in the early stages of recovery. That may reflect a number of factors, including the reappraisal of risk by lenders, investors and borrowers; uncertainty about the prospects for the economy; people and businesses choosing to pay off debt and restructure their financial positions, rather than taking on more debt, which impacts on the demand for finance by households and businesses; and financial institutions restructuring to deliver higher capital levels and more conservative loan exposures. Having said that, it is absolutely important that creditworthy businesses should not suffer from constraints on the supply of lending, especially as demand recovers in the economy.

Dr. McCrea

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Does the Minister accept that many banks throughout the United Kingdom are strangling small and medium-sized businesses? If they give a loan to such businesses, they impose such a premium that it is impossible for the businesses to get through this time of recession.

Ian Pearson

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I want to respond to that accusation directly, because banks have received substantial taxpayer support and they must do all that they can to lend to creditworthy businesses and to support the recovery. I want to go on to give some of the available figures.

Bob Spink

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Ian Pearson

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I only have a limited amount of time, so let me make some progress with my speech. If I have time, I shall then give way.

It is important that businesses have the necessary capital to invest in their factors of production, to invest in product development and to have the means to expand and grow, in particular as we—hopefully—secure the recovery. There should be opportunities for UK firms to compete successfully in the global marketplace, and barriers to finance should not prevent them from doing so.

I am dismayed that I continue to hear stories from hon. Members about companies that are not able to access the sort of funding required to help their businesses for the future. There is evidence out there that more lending is beginning to flow to businesses, which is encouraging. Surveys, such as those from the Department for Business, Innovation and Skills and the Bank lending panel, all suggest that around three quarters of businesses get finance from the first source that they approach—it is important to put that on the record.

Hon. Members will appreciate that nearly 6,000 small and medium-sized businesses have received more than £605 million so far in loans from banks through the enterprise finance guarantee, which the Government introduced. RBS is committed to lending through that scheme, as well as through the European Investment Bank discounted loan scheme, which I would recommend as a funding option for growing businesses that are looking to make capital investment, although the scheme has not been promoted nearly enough by the banks. Indeed, we as a Government could do more to promote the availability of those funds.

RBS data show that the bank is approving the vast majority of loan applications. RBS figures for 2009 show that the bank accepted 85 per cent. of all applications from SMEs. The increase in lending is of fundamental importance, but ensuring that customers are treated fairly is equally important. That issue has been raised by hon. Members, who should be aware that RBS has developed an SME customer charter. We worked alongside the bank to produce that charter, which set out the level of service that customers should expect to receive from their bank and includes features such as a 1.5 per cent. cap on overdraft and loan arrangement fees; ensuring that the price of loans or overdrafts reflects the cost of funding; a pledge to support business start-ups; and a programme of seminars to provide expert guidance.

We have taken actions, including on bank lending commitments. RBS has committed to lending £16 billion during the year ending this month and we are discussing its future lending commitments. We expect banks to continue to offer competitively priced loans, to ensure that businesses get a fair deal, but decisions about pricing or terms and conditions of loans to specific businesses remain commercial decisions for banks and building societies. It would not be right for the Government to intervene in such decisions. Any dispute between a ​bank and a business should be resolved by the parties involved, initially by going through the bank’s complaints procedure.

Mr. David Hamilton

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Does the Minister understand that the issue does not affect new companies alone, but well-established companies with long-term relationships with the bank? There is something wrong with the bank—the Select Committee on Scottish Affairs drew the conclusion two weeks ago that the Royal Bank of Scotland has a structural problem in how it deals with such businesses. The bank is virtually blackmailing some of the businesses that it has been dealing with for years, and is foreclosing on others.

Ian Pearson

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I understand the ongoing concerns. My hon. Friend is right to say that there is an issue with existing businesses but, on RBS’s figures, 85 per cent. of loan applications, which includes existing businesses, are accepted at the moment.

Several hon. Members

Ian Pearson

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I only have two or three minutes left, so let me respond with a few other things relevant to the debate.

I referred to the bank’s complaints procedure, but the Financial Ombudsman Service for small businesses is available, if people are not satisfied that they have received the right and appropriate treatment through the bank’s complaints procedure. Hon. Members will be aware that RBS also operates a business hotline, which assists viable businesses in accessing loans. It is designed to be a second pair of eyes for businesses whose loans are turned down first-time. The hotline number is 0800 092 3087. I understand that only two Members of Parliament so far have made use of it, but some 4,400 calls have been received from businesses. We can use the hotline in our constituency roles, to take up the cases of RBS business customers who are not getting a fair crack of the whip.

The hotline is clearly not applicable or appropriate in the circumstances to the case described by my hon. Friend the Member for Lanark and Hamilton, East, which went down the litigation route. He raised some serious allegations about the operation of the Royal Bank of Scotland. Undoubtedly, such matters will be determined by the courts. Certainly RBS is well aware of today’s debate. My hon. Friend said that RBS is happy to meet him, which would be a good way for him to pursue the matter.

Overall, the Government’s continuing actions are deliberately designed to address the flow of credit in the economy. We do not want to see credit constraints impeding recovery. We need to do all that we can to encourage lending. We have secured lending commitments from RBS and the Lloyds Banking Group, and we shall make further progress in that area.

11.30 am

Hamilton businessman’s gruelling seven-year battle with RBS continues – Daily Record

A bankrupt Hamilton businessman’s costly seven-year battle with RBS looks set to continue with “no sign” that the banking giant is prepared to settle the matter.

Property developer Derek Carlyle’s dispute with the bank started in 2008 when the bank pulled out of a loan leaving his business Carlyco Ltd “in ruins”.

But last spring matters moved in Mr Carlyle’s favour when the UK Supreme Court ruled a judge’s decision – that the bank had broken their promise to him over the £1.45m loan – had been the right one.

This week, however, seven months after that landmark ruling, Mr Carlyle told the Advertiser that RBS are “refusing to discuss any prospect of a settlement”.

Mr Carlyle’s MP Margaret Ferrier (Rutherglen and Hamilton West) recently wrote to RBS chief executive Ross McEwan, urging him to intervene, in a bid to have the matter settled.

She told Mr McEwan in a letter dated October 2: “Following your bank’s defeat in the Supreme Court, Mr Carlyle argues that no attempt has been made to act in good faith as to enter into settlement discussions.

“In June this year Mr Carlyle’s solicitors presented a settlement proposal to the bank for discussion with a deadline for response of August 7, 2015 – to which no response was received.

Full article here…


RBS urged by MP to settle case with bankrupt developer ahead of FCA report – Herald Scotland

Pressure is mounting on Royal Bank of Scotland chief executive Ross McEwan to call off the bank’s seven-year legal battle against bankrupt developer Derek Carlyle following his victory over the bank in the Supreme Court.

In a letter to Mr McEwan, Margaret Ferrier MP has said despite legal costs already estimated at £1m, RBS had made no meaningful response in four months to a settlement proposal on Mr Carlyle’s £3m counter-claim for damages following the court’s failure to uphold the bank’s £600,000 claim against him.

“My constituent is therefore left with no option but to try to obtain costly litigation funding in order to take the bank to the Court of Session,” Ms Ferrier says. “This will prolong the matter and cost both parties an increasing amount of money, causing my constituent who has done nothing wrong more stress.”

The MP notes that the Financial Conduct Authority is about to report on allegations that the bank’s now disbanded Global Restructuring Group (GRG) mistreated small firms. She says Mr Carlyle’s case has been handled continuously from 2008 until the present by two bankers formerly in the Edinburgh-based GRG…

“Obvious Solvency”

“The developer’s former MP Jim Hood, speaking in the Commons in 2010, said “the taxpayer should not be funding personal vendettas by bank personnel”.    His comments came after Mr Carlyle was sequestrated for a £4000 debt  in spite of having a £3m claim against the bank still in progress , and was then subjected to a record 12-year bankruptcy restriction order after a sheriff court received submissions from RBS objecting to the recall of his sequestration”.

“Ms MacLean noted that Scottish Legal Aid Board funding for the Court of Appeal stage had been conditional on Mr Carlyle’s obvious solvency in the event of winning his claim.  Had the same reasonable judgement been used in 2010, the lawyer said, the developer’s sequestration would have been recalled in Hamilton Sheriff Court. Instead at the bank’s instigation he had been subjected to the order which means he cannot be involved in any way in a business for 12 years or borrow more than £500”.

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Pressure grows on RBS as victims of restructuring scandal cry foul at “conflicted” advisors – Herald Scotland

A former Aberdeen oil firm owner who accuses RBS of “stitching up” his business has criticised the bank for appointing the accountancy firm that handled his firm’s administration to review alleged wrongdoing by RBS’s global restructuring group (GRG).
Rod Coffey, former chief executive of Stable Holdings, which leased oil drilling equipment, said he was surprised to hear of the appointment of PWC earlier this month, saying it felt like “RBS is once again teaming up with its buddies”. The alleged wrong-doing by GRG is also being investigated by the Financial Conduct Authority.

Full article here…


Journalonline.co.uk – Broken Promises


On 11 March 2015, the UK Supreme Court announced its long-awaited decision in the Scottish appeal Royal Bank of Scotland v Carlyle [2015] UKSC 13. In 2007, Derek Carlyle had sought funding from RBS to buy and develop plots at Gleneagles. Due to a buyback clause imposed by Gleneagles, Carlyle was going to make a loss on the land unless he developed it. He told RBS that it was essential, if lending him the money to buy the land, that the bank also lent him the money to develop it. RBS confirmed during telephone discussions that it understood this, and verbally advised Carlyle that funding was “all agreed”. However, no development funding was ever provided by RBS, which raised proceedings against Carlyle in 2008 seeking recovery of the sums loaned by them for the land acquisition. All five UK Supreme Court Justices found in Carlyle’s favour.

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Support for the “little guy”

Below is an excerpt from the Journal Online PDF…

Derek Carlyle’s appeal to the Supreme Court was one of the first in Scotland to be supported by third-party funding, relating to that part of his costs which were not contingent.

The funder was Restitution Ltd, founded in 2012 by two high net worth individuals who recognised that inequality of resources was restricting access to justice, particularly when individuals were pitted against large institutions.

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Herald Scotland 17/04/15 – Derek Carlyle judgement went against the grain – Roddy Dunlop QC

The landmark Supreme Court judgement in favour of bankrupt developer Derek Carlyle and against Royal Bank of Scotland went against the grain of Scotland’s legal system, a leading advocate has said.

Roddy Dunlop QC told a conference staged in Edinburgh by MBM Commercial, which specialises in cases against banks, that public disquiet with bankers tended not to be matched by the courts, which had appeared “protective” of banks.

He said the Inner House appeal court in Edinburgh had allowed RBS’s appeal in the Carlyle case, but had been criticised by the Supreme Court for interfering in the original judgement by Lord Glennie. The QC warned that ending automatic right of appeal to the UK’s highest court might make such outcomes less likely in future.

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