Can RBS destroy its reputation even further? Firm sued over $1.1 billion loan amid EURIBOR manipulation

The litany of adversity that continues to plague Royal Bank of Scotland Group plc (LON:RBS) includes some of the highest profile dissent among commercial and retail investors, ranging from regulatory censuring for manipulation of FX benchmarks at a cost of $344 million, followed by a series of class action civil lawsuits which resulted in penalties […]

The litany of adversity that continues to plague Royal Bank of Scotland Group plc (LON:RBS) includes some of the highest profile dissent among commercial and retail investors, ranging from regulatory censuring for manipulation of FX benchmarks at a cost of $344 million, followed by a series of class action civil lawsuits which resulted in penalties of $395 million to the US Department of Justice and $274 million to the Federal Reserve to resolve the investigations.

download

This high profile litigation came just a few years after the near collapse of RBS under the steerage of Fred Goodwin, which was brought about by his strategy of aggressive expansion primarily through acquisition, including the takeover of ABN Amro, eventually proved disastrous and led to the near-collapse of RBS in the October 2008 liquidity crisis. The €71 billion (£55 billion) ABN Amro deal, of which RBS’s share was £10 billion, in particular stretched the bank’s capital position – £16.8 billion of RBS’s record £24.1 billion loss is attributed to writedowns relating to the takeover of ABN Amro.

Mr. Goodwin left his position but aggressively guarded his pension which was represented by a notional fund of £8 million. Upon his departure, despite bringing the bank to near collapse, the fund was doubled to a notional fund of £16 million or more, because under the terms of the scheme he was entitled to receive, at age 50, benefits which would otherwise have been available to him only if he had worked until age 60.

Despite the negative optics, RBS, which remains one of the world’s largest interbank FX dealers, continues to find itself at the receiving end of extremely expensive litigation, this time at the hands of a former property tycoon who is suing RBS over a £1.1 billion loan deal signed at the height of the financial crisis, a case which could set a precedent leading to a potential deluge of other legal actions against the state-backed bank.

Glenn Maud, who bought Santander’s global headquarters in 2008, has launched his legal action in London’s High Court over a deal signed with RBS and other European banks to purchase the Spanish bank’s Ciudad Financiera complex in Madrid.

Following the insolvency of RBS in 2008 and the departure of Fred Goodwin, the bank was bailed out by the British government, which to this day continues to own 73% of the bank, thus the several instances of misconduct, costing billions of dollars, is not a matter for the shareholders alone, but also the British taxpayer.

Mr. Maud claims that his Spanish property vehicle Marme Inversiones agreed a loan arrangement with fixed interest payments, however the deal used the Euribor (an acronym for European Interbank Offered Rate) which is the interest rate at which banks lend to each other in euros, which Marme alleges was being manipulated by RBS.

According to a report by the Daily Mail, Marme is demanding that the contract should be rescinded because it says RBS was interfering with the interest rate.

The claim is part of a new wave of civil litigation which is trying to get courts to set aside historic contracts which were based on manipulated rates.
In Marme’s case, that would involve RBS returning £110 million in payments already made under the swap and foregoing a further £250 million in payments it is demanding to wind up the contract.

RBS, which was the lead bank involved in the deal, is thought to be likely to argue that its settlement with the EC involved no explicit admission that it had manipulated the rate. Marme was placed under Spanish bankruptcy protection measures last year after failing to repay the original £1.1 billion loan it took out.

A spokeswoman for the bank said: ‘RBS believes that there is no merit to this claim, which it is defending vigorously.’

Earlier this year Mr. Maud won a case against the Libyan Investment Authority, which allowed him to avoid paying £17.6 million owed to it. The legal decision was made on the basis that the payment would breach sanctions rules.

Read this next

Digital Assets

BlackRock digs further into crypto with metaverse ETF

BlackRock, the world’s largest asset manager with almost $10 trillion in AUM, is set to launch a new metaverse ETF to help investors securely monetize on the booming immersive version of the internet.

Digital Assets

Binance wins license in New Zealand as rival Huobi shutters derivatives

Binance, the world’s largest crypto exchange by traded volume, has obtained licenses to operate in New Zealand, even after rival Huobi shutdown derivatives trading last month due to concerns about regulations.

Retail FX

Hong Kong busts perpetrators of ‘ramp and dump’ scam

Hong Kong’s financial watchdog, the Securities and Futures Commission (SFC), has charged thirteen suspects of market manipulation in a joint operation with the local police.

Institutional FX

TradingView integrates market data from German Tradegate exchange

TradingView announced that it ‎has increased data coverage to allow its users to receive information from ‎and get free access to the intra-day and tick data from Tradegate Exchange.

Retail FX

Spotware Systems introduces Custom Push Notifications for cTrader mobile apps

Spotware Systems, a technology provider for the electronic trading industry, is introducing a new push notification feature to alert mobile users of price swings and market fluctuations through their cTrader app.

Market News

The Week Ahead: 30 September from David Madden, Market Analyst at Equiti Group

Sterling dominated the headlines last week, as there were concerns the UK government might struggle to service its debt.

Inside View

How does the quality of signal providers affect your business?

A must-have onboarding process for brokers with investment services like PAMM, MAM, or copy trading

Technology

DBS deploys Nasdaq Trade Surveillance

“The confidence that markets and our clients have in DBS as a safe and trusted banking group is anchored on our ability to detect and respond to anomalous activity, which in turn calls for a robust surveillance and prevention infrastructure.”

Industry News

SEC charges Justin Costello and David Ferraro for securities fraud and posing as billionaire veteran

The Securities and Exchange Commission charged Cannabis executive Justin Costello and David Ferraro, an associate of Costello’s, for promoting the stock of several microcap companies on social media without disclosing their own simultaneous stock sales as market prices rose.

<