RBS Small-Business Lender Heads ‘Lost Their Moral Compass’

(Bloomberg) -- Royal Bank of Scotland Group Plc’s small-business lender is back in the spotlight 15 months after financial regulators found it systematically mistreated clients in a bid to drive profits.

Emails between RBS executives referring to the banks’ relationship with property developer Oliver Morley, who’s suing over a 2006 deal for the repayment of a 75 million-pound ($97 million) loan, create a picture “of individuals who have lost their moral compass,” Morley’s lawyer Hugh Sims told a London court at the opening of the trial Monday.

Morley alleges that the lender, under the influence of an arm of the U.K. government’s treasury, used unlawful threats to pressure him to transfer his assets to an RBS subsidiary. This included a warning from RBS that it would use a pre-packaged sale to the subsidiary if Morley didn’t agree to the deal, Sims said. The bank denies the claims and says it acted properly.

“Morley was pushed into submission for reason of lack of any alternatives,” Sims said, pointing to e-mails between RBS executives.

Morley says he suffered a loss of 34.2 million pounds in income and capital gains because of the break-up of his real-estate portfolio.

A November 2009 message sent to Toni Smith, a manager at RBS’s Global Restructuring Group, to schedule a meeting to discuss Morley’s situation referred to a “room booking for the Morley massacre on Tuesday,” what Sims describes as “prescient words.”

Two weeks later, Smith emailed Joss Brushfield, director of the bank’s real estate asset management unit, that if Morley “disagrees then it’s his head on a spike,” referring to a proposed deal.

The messages are “graphic illustrations of what’s in reality going on the ground, which was huge pressure imposed on Morley,” Sims said.

In July last year, financial regulators published a report on the GRG unit after a lengthy investigation. It found that “systematic” mistreatment of small businesses took place and the unit often prioritized revenue generation over its clients’ long-term interest in a bit to establish itself as a “profit center” for the bank.

Any information provided by Smith to Morley and his team wouldn’t have been phrased as threats and were simply warnings, RBS’s lawyer Paul Sinclair said in written submissions. Even if Smith did make “threats,” the bank’s conduct “was not unlawful,” he said.

To contact the reporters on this story: Ellen Milligan in London at emilligan11@bloomberg.net;Eddie Spence in London at espence11@bloomberg.net

To contact the editors responsible for this story: Anthony Aarons at aaarons@bloomberg.net, Christopher Elser, Peter Chapman

©2019 Bloomberg L.P.