Page 216 - Bank Case Studies

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 rather than

base rate (See Diagram 4). Moreover, the bank would now

make money.