Tomlinson lays into RBS and their Global Restructuring Group

30 January 2014

Lawrence Tomlinson, the government advisor and entrepreneur, has accused the Royal Bank of Scotland  of acting like a "vampire" that sucks cash out of profitable businesses.

He made this claims whilst appearing before the Treasury select committee yesterday. He told MPs he had gathered evidence from hundreds of businesses that suggested RBS' Global Restructuring Group (GRG) turnaround division had been driving profitable firms out of business and seizing their assets.  They achieved this by withdrawing lines of credit from healthy firms and increasing fees hence making them insolvent and so seizing their assets.

However, Sir Andrew Large, the sometime Deputy Governor of the Bank of England and more recently author of a report into the way RBS lends to SMEs, said that in the course of his own inquiry he had uncovered no hard evidence to support the allegations made by Tomlinson, but he nevertheless considered them plausible.

Mr Tomlinson does have an axe to grind in that his own firm, LNT Group, had difficulty refinancing with RBS so he is not completely impartial.  But on the balance of probabilities it does look as if RBS were perhaps a bit too keen to say that a business was no longer healthy or did not have a viable future.  It should be noted that banks are often kept in the dark as to the exact state of a business as directors sometimes have personal guarantees so they pay them rather than their suppliers or HMRC.  As soon as the bank gets a whiff of a risk to their lend they play their ultimate card which is to call in the administrators.  Of course, one area of concern here is the fact that there is a club of firms otherwise known as "the bank panel" who are guaranteed all the work from the bank.  Is this fair??

Following Mr Tomlinson's report, RBS chief executive Ross McEwan brought in the law firm Clifford Chance to examine the claims. The Financial Conduct Authority has also launched a probe.