THOUSANDS more private shareholders and a number of institutions have joined the multi-billion pound legal action against Royal Bank of Scotland and former directors.
The RBoS Shareholders Action Group has revealed that up to 4,000 extra private investors have now joined the lawsuit, taking the total to about 12,000 compared with 8,000 last autumn.
In addition, the group says close to 100 institutional investors are involved compared with a little over 90 a few months back, with hopes the figure could go higher.
RBoS sources said the action group was hopeful the case could open later this month or early spring, and that the claim may now exceed £3.5 billion. Previous reported estimates of the suit ranged between £2.5bn and £3.3bn. The action group alleges shareholders were misled about the financial strength of taxpayer-funded RBS when it launched its £12bn rights issue in April 2008.
The controversial cash call followed the Scottish bank’s disastrous consortium-led takeover of Dutch bank ABN Amro the previous year, which subsequently brought it to the brink of collapse and a £45bn state bailout.
One source close to the action group said: “We have been inundated over the past couple of months with many more individual shareholders joining the legal action.
“The looming deadline for a court case, which we now think could possibly be as early as the end of February, looks like it has had a strong effect.
“We have also seen several other institutions now come forward to join the action, bringing the total number up to the late 90s. We have good reason to hope that institutional figure may go higher.”
It is understood RBoS is naming four former senior RBS directors in its claim: chief executive Fred Goodwin, chairman Sir Tom McKillop, investment banking head Johnny Cameron, and finance director Guy Whittaker.
One of the group’s main allegations is that RBS misled investors in the rights issue by quoting an end-2007 tier one capital ratio – the reserves that back its loan book – of 7.3 per cent in the prospectus. The shareholders say information now available shows the actual capital ratio at the time of the cash call was a weaker 6.2 per cent.
It also claims the prospectus failed to inform investors that RBS was at the time getting £8bn of emergency funding from the US Federal Reserve during the financial crisis, and had held talks with Britain’s Financial Services Authority regarding concerns about its financial strength.
The case has taken many months to reach the brink of getting to court as RBoS has had to raise an estimated £20 million from insurers and litigation funds to be able to place a bond before the judge. It could then call on it if it loses the lawsuit and has to pay the defendants’ costs.
As well as leading British investors in RBS, the action group is understood to have attracted the backing of institutions from Canada, the United States and Norway.
RBS declined to comment. Last year US judges found in the bank’s favour regarding two legal actions by holders of RBS preference shares and American Depositary Receipts.
The latest case comes as RBS is expected shortly to receive regulatory fines of between £450m and £500m for the part its traders allegedly played in the rigging of the London Interbank Offered Rate (Libor).