Royal Bank of Scotland remained tight-lipped last night over allegations that a senior risk manager warned about a cover-up of traders’ losses before the group’s collapse.
A new book by former Scotsman editor Iain Martin claims the bank parachuted in Victor Hong from JP Morgan as a senior risk manager in 2007, but he quit after just six weeks because executives would not heed his concerns.
A spokesman for the bank said yesterday it would “not comment at all” on the contents of the book, which carries the sub-heading “Fred Goodwin, RBS and the men who blew up the British economy”.
Although there have been claims in the past that RBS ignored warnings over Goodwin’s management style, this is the most specific claim yet that managers were told of the dangers of overpricing securities on the bank’s books.
RBS is alleged to have been valuing securities on its books at around 90 per cent of their face value, when they were changing hands on the market for much less – sometimes as little at 20 per cent.
Hong is said to have identified the problem a year before RBS’s collapse, which destroyed shareholder value and necessitated a bail out from which the British taxpayer is yet to recover the £45 billion it ploughed in.
Hong is said to have been blocked from raising his concerns with the bank’s auditors, and quit rather than sign off on the valuations the bank was using.
The revelations come as RBS tries to sell off or float a business containing more than 300 branches, one of the conditions imposed by European regulators following the state aid it received in 2008.
The sale of the Williams & Glyn brand follows five years of massive down-scaling of the bank’s balance sheet, as part of a stabilisation tactic by post-crisis leader Stephen Hester.
RBS’s new chief executive, Ross McEwan, formally takes over at the helm from Hester in October.