RBS: taxpayer will carry the can

Laith Khalaf, senior analyst at Hargreaves Lansdown, says taxpayers will end up paying for any action resulting from the FCA investigation into RBS.

RBS: taxpayer will carry the can

Reports based on documents leaked to BBC Newsnight and BuzzFeed News this week suggest that Royal Bank of Scotland deliberately damaged and destroyed businesses in order to boost its own revenues.

In 2014 the Financial Conduct Authority commissioned Promontory Financial Group and Mazars to investigate allegations against the bank by business customers. This investigation has now been concluded and the findings presented to the regulator, who is in the process of reviewing the material before issuing its own conclusions, along with any enforcement action deemed necessary.

The evidence now looks pretty damning against Royal Bank of Scotland, yet the irony is the taxpayer is going to end up carrying most of the can for any misconduct costs as the Exchequer still owns around three quarters of the bank.

RBS is already potentially facing a multi-billion dollar fine in the US for mis-selling in the run up to the credit crunch. These latest revelations suggest the financial crisis may not have brought an end to bad behaviour at the bank however, which looks to have continued while under government ownership.

The financial watchdog will give its verdict on the allegations facing RBS in due course, which could lead to yet another fine, and the prospect of a fresh wave of litigation. It’s a sad fact that despite the spectre of the PPI scandal beginning to fade away, conduct costs remain a material threat to the Royal Bank of Scotland.

The prospect of further ongoing conduct costs, combined with the delayed separation of Williams and Glyn, and a seriously depressed share price, all mean the prospect of the bank leaving government hands remains a distant prospect, if the taxpayer is ever to recoup the money from its £45bn bailout.


Please remember, no news or research item is a recommendation or advice to buy. Every Investor is not responsible for accuracy and may not share the author’s views. If you are unsure of the suitability of any investment for your circumstances please contact an adviser. All investments can fall as well as rise in value so you could get back less than you invest. 

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