Page 8 - RBS GRG F Case Study

What was GRG?

RBS had created GRG, to help

struggling companies get back on

their feet, effectively it acted as a

turnaround division. Many
business banking customers of RBS

were informed during the period 2008 – 2013 that they

were “over-geared” or underperforming, and as such

were transferred to the GRG.

The process by which RBS achieved these transfers was

initiated through the bank approaching the client for a

review. The result of which was that the client would

have to have a revaluation of assets and a business
review to be undertaken by an accountant. Inevitably the

accountant’s report would indicate that the business was
perilously close to having no, or substantially negative,

cashflows. Furthermore, the accompanying valuations

would show that the Loan To Value (“LTV”) on the client’s

property assets were below the rate agreed in the

original lending arrangements.

The Bank was thus allowed to default the lending. At this

point the bank would move the customer into its GRG

division where it would usually be offered a new loan,

with extortionate and often complex fee structures.

The new loans would be agreed that substantially

increased the margins and moved the lending to LIBOR