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RBS clashes with Sants over rights issue lawsuit

by: IFAonline
  • 20/12/2013
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RBS clashes with Sants over rights issue lawsuit
Royal Bank of Scotland's (RBS) defence against a £4bn lawsuit from shareholders contradicts evidence given to MPs by former Financial Services Authority (FSA) boss Hector Sants, it has emerged.

The 81% state-owned bank is fighting a claim from individuals and institutions who say directors gave a false impression of the lender’s financial position in the prospectus for its £12bn rights issue, the Daily Mail reports.

Part of the case hinges on whether City regulators were already concerned about RBS’s capital position in the run-up to the publication of the prospectus in April 2008.

‘Contrary to the allegation, the rights issue was not forced on RBS by the FSA,’ according to law firm Herbert Smith.

But in 2012 Sants (pictured), said the FSA had raised concerns about the bank’s capital position some time between November 2007 and April 2008 – instructing former boss Fred Goodwin to raise cash.

‘We realised that RBS was short of capital,’ said Sants at a Treasury committee hearing in January 2012.

‘It was me personally in a meeting with Fred Goodwin that pressed him to have a rights issue. I have no doubt that he would not have had a rights issue of that size without my personal intervention.’

In its defence document, RBS claims Sants only urged Goodwin to raise cash after the bank had already made plans to do so.

But Sants’s testimony indicated the FSA’s concerns stretched back to November 2007, while the bank’s claim it was not told to raise cash directly contradicts the former regulator’s version of events.

RBS also says the key factor in its demise was the collapse of Wall Street bank Lehman Brothers in September 2008, months after the rights issue.

The case is expected to see Fred ‘the Shred’ Goodwin appear in the dock for the first time to answer for his disastrous stewardship of the bank.

Taxpayers, currently sitting on a £16bn loss, had to inject £45.5bn to save RBS from outright collapse.

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