What can we really learn from RBS’s GRG horror story?

Information leaked this week sheds more light on the murky RBS GRG story. Internal RBS documents appear to have encouraged the provocation of healthy businesses into default condition from where extortionate fees were charged, external independent property valuations overridden by internal valuations and properties sold into an RBS property company to be sold later at a profit.

An internally commissioned report from RBS’s external legal advisors did not remark on this and RBS deny systematic wrong doing. A report commissioned by the then minister responsible, Vince Cable, has still not emerged from the FCA and is now two years’ overdue. Obfuscation, procrastination and conspiracy theories abound. In due course the facts will come out and it is to be hoped those businesses and their owners who have suffered from the excesses of creditor power will be properly compensated.

But what can we really learn? That some rogue bankers playing on a far from level playing field will take undue advantage? No. That was ever the case and forever will be. The real issue is that in the UK, creditor interests are tipped too far in their favour to the detriment of value preservation and business survival. Had the moratorium contained in the Insolvency Service proposal currently under consideration for introduction in 2017 been in force at the time, much of GRG’s excesses could have been avoided and viable businesses would have survived.

So whilst we would urge the FCA to publish, and GRG be damned if that is what the report will say, we also strongly urge parliament to expedite the introduction of the proposed pre-insolvency moratorium.  This will achieve a better balance between debtor and creditor rights in the interests of enterprise value preservation and the avoidance of heavy handed creditor intervention.

Alan Tilley – Managing Partner & Chairman, BM&T
11th October 2016

Company Doctor's Diary

Notes, insights and reflections from Matthew, one of our directors and turnaround experts, as he works with companies during Lockdown.