RBS to axe controversial SME turnaround operation

Sir Andrew Large's report said that the nature of RBS's business turnaround operation left it open to accusations of conflicts of interest. Picture: Getty
Sir Andrew Large's report said that the nature of RBS's business turnaround operation left it open to accusations of conflicts of interest. Picture: Getty
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ROYAL Bank of Scotland is shutting down its controversial business turn-around division and the two most
senior executives who ran it are to leave the bank next spring.

RBS’s global restructuring group (GRG), whose job was to try to turn around mainly small and medium-sized businesses (SMEs) that were struggling, and recover loans made to them, was criticised last year by a top UK
government adviser.

Lawrence Tomlinson, a multi-millionaire adviser to Vince Cable’s Department of Business, accused the division of effectively forcing companies into financial distress and buying their assets at rock-bottom prices.

Tomlinson alleged that RBS had been guilty of putting many struggling small businesses “on a journey towards
administration, receivership and liquidation”.

An independent report commissioned by RBS from top City law firm Clifford Chance in the wake of the allegations, in which it reviewed 1,200 documents and interviewed 138 SMEs, found no evidence of the bank attempting to defraud its customers.

However, an earlier independent report also commissioned by the bank from Sir Andrew Large, a former deputy governor of the Bank of England,
said RBS was open to accusations of conflict of interest by small firms placed in the restructuring division because of its opaque management structure.

RBS would not comment yesterday. But it is understood staff were told of GRG’s closure by e-mail. The e-mail said that Derek Sach, who heads the division, and Aubrey Adams, who leads its property arm, will both leave the bank on 31 March, 2015.

Sach was rapped by MPs on the cross-party Treasury select committee earlier this year for claiming that the global restructuring group was not a profit centre, with the bank later writing to the committee accepting the use of the term.

Laura Barlow, who joined RBS’s business turnaround team in 2009, has been appointed to lead the bank’s new
restructuring unit.

She will report to David Stephens, the bank’s chief risk officer. One source said the new unit will be more integrated with the main bank than its predecessor had been.

Commenting on the changes, Andrew Tyrie MP, chairman of the Treasury committee, said: “The important issue here is whether RBS is now – and is seen to be – acting in the long-term interests of its shareholders and SME customers. This suggests that RBS still has a long way to go.”

The bank would not say what jobs Sach and Adams would do between now and when they left the organisation, or whether they would receive severance payments.

GRG’s operation, which is the subject of an investigation by the Financial Conduct Authority due to be published early in 2015, swelled with loans during the financial crash.

However, the division, which was set up before the financial crisis broke in 2008, has seen a sharp decrease in businesses referred to it as the UK economy has improved.

A fortnight ago, RBS posted an interim profit of £2.65bn, about £1bn greater than City expectations.