RBS: Yet more taxpayers’ cash goes to pay for bankers’ misdeeds

RBS, Brexit and yet more taxpayers cash going down the drain as a result of the misdeeds and mistakes of bankers. No, this is not click bait. There is a link.

Let me explain.

RBS has just set up a £400m compensation fund for small businesses thrown to the wolves of its now defunct Global Restructuring Group (GRG).

GRG was the operation set up to deal with struggling business borrowers that Lawrence Tomlinson, former entrepreneur in residence at Vince Cable’s Department for Business, Innovation and Skills, claimed had pushed viable firms to the wall for profit in an incendiary report.

The latest in a growing list of hugely expensive, exhaustively researched, reports to follow his – this one an official “skilled persons review” commissioned by the Financial Conduct Authority – has just been completed.

It didn’t find evidence to justify the most controversial of Mr Tomlinson’s allegations but, from the FCA’s summary of its findings, we can deduce that it was hardly complementary and confirms that bad things did indeed happen.

But we already knew that. The evidence is out there, and has been mounting. The latest came via the leak of documents detailing the bank’s “dash for cash” plan that encouraged GRG staff to squeeze money out of struggling firms by hiking fees and loan repayments, rewarding those that did with bonuses.

All this has led to the creation of a £400m fund to compensate the victims, the operation of which will be overseen by retired High Court judge Sir William Blackburne.

About 4,000 GRG clients will have complex fees they were charged refunded through it, although that won’t provide much comfort to those whose businesses were lost.

The only problem with it all is where the money for that fund is coming from. The cost of it will ultimately be borne by RBS shareholders. That means taxpayers, who collectively own a shade over 70 per cent of this bank. That’s right, you and I are yet again paying for the misdeeds of bankers.

£400m is an awful lot to be paying out for the misdeeds of others. Particularly given that the dash-for-cash bonuses have been banked and the executives that oversaw their payment are enjoying absurdly comfortable retirements, if they haven’t found other high paying jobs.

The Financial Conduct Authority told me today that it isn’t ruling anything in or out as regards taking action against the individuals responsible for the GRG scandal. Unfortunately, the record of city watchdogs when it comes to calling bankers to account does not inspire great confidence. Just one man paid a financial penalty as a result of the financial crisis – Peter Cummings from Hbos. Another, Johnny Cameron from RBS, accepted a voluntary ban from the City. That’s it.

Some of the subsequent scandals – Libor fixing for example – have led to successful prosecutions. But not of any executives.

Which brings us to the disaster of Brexit, an historic mistake on the part of 37 per cent of this country's electorate. Is it any wonder that, given what I detailed above, some among the ranks of its backers voted that way because they saw it as an opportunity to kick out at an amoral and self interested establishment. Is it any wonder that so many people fell prey to the cynical blandishments of demagogues like Nigel Farage and Arron Banks, with their talk of “peasants revolts”, when the lords of the manor continually refuse to take action against bad pennies in their midst?

The irony, of course, is that the British state Brexiteers like those two want to empower, is responsible for the creation of this climate. It is Britain that lets its bad bankers get away with it and not the European Union. But that doesn’t much matter to angry people, whipped up by misleading propaganda. Too many of them just relished the chance to kick out against someone. We’ll all pay a price for that.

The financial crisis, the scandals like this one that emerged in its wake, and the fact that those responsible for them got away with it, are not solely to blame for the toxic political climate that prevails in Britain and the wider Western world today. But they have surely played a role.

I fear they will be repeated. While regulations have been tightened, it is still hard to see anything meaningful in the new rules that will deter people from taking the risk of creating something like RBS’s “dash for cash” if the rewards are sufficient to do so.

I was discussing the issue with Panmure’s city commentator David Buik this morning. He reminded me of something I had previously written: “Until someone goes to jail there is no deterrent and it will never stop.”

That was seven years ago.