February 8, 2013 § Leave a comment
Today, Royal Bank of Scotland chief executive Stephen Hester used a speech at the London School of Economics to call for a new “compact” between banks and society. With his industry engulfed in scandal and widely despised by customers and the general public, Hester said “the current level of negative feeling is, in my view, particularly unhealthy. We need to reach a new compact with society where banks are better at balancing the interests of everyone who depends upon them.”
We certainly do. But if this is Hester’s goal, he has a decidedly odd way of going about it. Under his leadership RBS has been shifting billions of pounds of commercial property assets from its banking book into its vast commercial property repository, West Register. In the process the bank has been destroying the livelihoods of many of its borrowers.
The juggling act suits the bank, which also owns NatWest, as it enables it to avoid crystallising losses on loans that can be decreed to have gone bad and to transform liabilities into assets. The commercial real-estate hustle is central to Hester’s recovery program, enabling him to massage the RBS balance sheet and ultimately to flog off customer assets for much-needed cash.
The practicalities of the strategy are distasteful, though. They include reneging on lending agreements, arbitrarily changing lending agreements, persuading friendly chartered surveyors (and in-house surveyors) to concoct fantasy valuations designed to help the bank, for example by putting customers in breach of loan-to-value agreements, bully-boy tactics, and other nefariousness and skulduggery.
The goal is to manufacture defaults in order that customer assets can be transferred into the bank’s repository for “distressed assets”, variously known as Specialised Lending Services, Global Restructuring Group (GRG) and West Register. Once they are there, they are seen as fair game by the Edinburgh-based bank. Both personal and business assets can be asset-stripped with impunity (see also my earlier blog: A short history of RBS’s Global Restructuring Group). read more
STILL: Markus Vater