Chief of toxic RBS arm felt pressure to break up firms

The former head of the toxic restructuring arm at Royal Bank of Scotland has told how the lender was put under pressure by a Government agency to push its small business customers into financial distress.

Appearing in court for the first time, Derek Sach described the fraught relationship between the bank and the Asset Protection Agency (APA) in the wake of the financial crisis.

The 71-year-old, who ran the Global Restructuring Group (GRG) at RBS, was called as a witness by Oliver Morley, a property developer who is suing the bank over claims it placed him under economic duress and sold some of his properties for its own benefit.

RBS denies the claims, which relate to a period in the wake of the financial crisis, when the Government owned more than 80 per cent of the bank following a £45.5billion taxpayer bailout. 

In order to firm up confidence in the bank, the now-disbanded APA insured more than £280billion of RBS’s bad loans. In return, it worked with the notorious GRG to manage how it dealt with troubled small businesses which had borrowed from the bank, making sure it extracted the maximum value.

The GRG was designed to help businesses which had fallen into trouble, with a view to rescuing them. But RBS documents shown in court describe GRG as a ‘profit centre’, and Morley claims the group wrung businesses like his for cash for the bank’s benefit. 

Questioned in the High Court yesterday by Morley’s lawyer Hugh Sims, Sach said the APA pushed for customers’ buildings to be transferred to RBS’s property division to be sold for the bank’s profit. And Sach confirmed that the APA had very little consideration for small business owners whose lives’ work was, in some cases, destroyed by GRG actions.

Sims asked: ‘You’ve gone on the record as saying that your perception of the APA at this time was frankly that they had no interest in customers at all.’

Sach agreed. He said the APA would have the final word in any decisions, with the objective of ‘maximising value’. Sach said: ‘It was clear that overrode everything except the rule of law.’

However the former banker later tried to back away from his implication that GRG was forced by the agency to put money-making ahead of rescuing businesses.

He said: ‘We resisted where we thought that they were getting it wrong and generally speaking, common sense and our view prevailed.’

Sach said the huge growth in business customers to between 10,000 and 12,000 in 2010 put huge pressure on GRG, which was managing around £70billion of assets. The trial continues.