Royal Bank of Scotland could face a parliamentary inquiry into the spiralling legal costs of defending itself and disgraced former boss Fred Goodwin in a case brought by shareholders after being accused by MPs of “bullying tactics”.
Three members of the influential House of Commons Treasury select committee have warned over political concerns about the taxpayer-backed lender’s legal costs, which are set to hit £125 million – including £6.5m spent on defending Mr Goodwin and three other former directors.
Labour’s Rachel Reeves and Wes Streeting, and Conservative Jacob Rees-Mogg, are demanding RBS bosses justify the “fortune” spent on the case when they unveil first quarter results on Friday.
They also want chief executive Ross McEwan to explain comments he made earlier this year apparently criticising staff for being among those suing the bank, and suggested the committee could launch an inquiry once the legal case is over.
Mr Streeting said: “RBS is waging a legal war against 27,000 small investors who have spent years trying to get justice.
“It’s both a grotesque waste of money and a bullying tactic. And it’s all the more concerning because taxpayers are footing the huge bill.”
The case, which comes to trial next month, is becoming one of the most costly civil defences in British history as RBS defends itself against claims brought by staff and shareholders over the lender’s £12 billion cash-call during the financial crisis.
Shareholders allege that RBS misled them about its financial health at the time of the 2008 rights issue. Shortly afterwards it had to be bailed out with more than £45bn of taxpayers’ cash, leaving investors nursing big losses.
The bank – still 72 per cent owned by the state – has already settled with around 80 per cent of its investors, although it has not admitted liability. However, the RBS Shareholder Action Group – which includes around 27,000 small investors and current and former staff – has not agreed to settle out of court.
Ms Reeves said: “If RBS loses this case, the bank will have a lot of explaining to do to staff, shareholders and the public on why it spent a fortune on this case.”
Mr Rees-Mogg added: “This affair is being closely watched by members of the Treasury select committee and is the type of issue the committee may well look into once legal proceedings are completed.”
Mr McEwan is also facing a backlash over comments he made in February over reports that former RBS vice-chairman Sir Angus Grossart was seeking to join the shareholders action group.
Mr McEwan said: “If I was an ex-director or a member of staff, I would not be taking a case against the bank I had served on.
“If I was a senior executive and I was responsible for the bank, I would not do that.”
The MPs’ comments follow those made by former business secretary Vince Cable last week. Mr Cable said that the bank’s legal costs were “obscene” and branded money spent on defending Mr Goodwin as “shocking”.
Mr Goodwin, formerly Sir Fred, was stripped of his knighthood following the bank’s near-collapse and its subsequent government rescue.
He will take the witness stand in the case on 8 June, which is also the date of the general election.