What does politicians and bankers have in common? They are liars and crooks, or at least behave like crooks. But they don’t really care as long as there is money to be made. Royal Bank of Scotland, which is supposed to be one of the prestigious banks in the United Kingdom, was involved in Malaysia’s 1MDB scandal, which has now become the world’s biggest white-collar crimes.
Royal Bank of Scotland’s (RBS) private bank – Coutts International – was found to have performed two payments totalling US$860 million made between September 2009 and September 2010 from 1MDB to an account in Coutts’ Zurich branch, known as the Good Star account – belonging to Jho Low, allegedly partner-in-crime of Prime Minister Najib Razak.
Just like HSBC, another British giant financial institution which is well-known for helping criminals, drug lords, terrorists and corrupt politicians in money laundering, RBS Coutts has its fair share of helping wealthy clients evade taxes. But RBS’s misconducts were not confined to helping people like Jho Low and PM Najib Razak plunder taxpayers’ money alone.
In what appears to be a similar misconduct done by Deutsche Bank, a 146-year-old “German Bank”, 289-year-old RBS is facing a possible fine of as much as US$27 billion over alleged misconduct before and after the 2008 subprime financial crisis. Like Deutsche Bank, RBS’s alleged wrong-doing includes the mis-selling of mortgage-backed securities in the U.S. which led on to the housing crisis.
The prospect of a fine of US$27 billion is close to double of the US$14 billion fine suggested by the US Department of Justice on the German Bank. Although RBS is somewhat convinced it could win in court and reduce the fines to around US$5.5 billion, experts warn the DOJ might fine the bank over US$11 billion in the next few months.
To add insult into injury, RBS also faces a fine of up to US$5 billion to settle a similar case with the US Federal Housing Finance Agency, for selling US$32 billion of mortgage-backed securities before the 2008 financial crisis. Last month, RBS agreed to pay US$1.1 billion to settle a lawsuit filed by National Credit Union Administration on behalf of two corporate credit unions.
In UK alone, RBS is facing legal problems involving over 100 small businesses claiming about £1 billion (US$1.23 billion) due to distressed businesses in the aftermath of the 2008 financial crisis. In a separate case, the bank’s customers are reportedly seeking nearly £2 billion (US$2.45 billion) in damages for mis-selling Enterprise Finance Guarantee loans aimed to help small companies.
In its latest financial report, boss Ross McEwan reveals RBS swung to net loss of £469 million (US$570 million; RM2.4 billion) from a £940 million (US$1.14 billion; RM4.8 billion) profit a year earlier. The £469 million quarterly loss was more than twice the £231million loss estimated by analysts. The losses were partly driven by a fresh £425 million misconduct charge.
RBS, which succumbed to a £45.5 billion state bailout during the 2007-09 financial crises, has not made an annual profit since 2007. The British government is currently sitting on a £25 billion loss on its investment. In the first 9 months of 2016, RBS made a £2.5 billion loss after incurring a £469 million loss in the third quarter mentioned above.
The bank, which is 73% owned by the British taxpayer, also reported £469 million of additional restructuring costs, largely as a result of its extended struggle to sell Williams & Glyn. However, Chief Executive McEwan said the bank would miss an end-2017 deadline to sell its Williams & Glyn branch network, a condition of its 2008 state rescue.
Once the deadline has passed, the European Commission will be entitled to appoint a trustee to take control of the disposal process, which could see Williams & Glyn sold off at a steep discount to its £1.3 billion valuation. Clydesdale and Yorkshire Banking Group has made a bid for the 314 branch network of Williams & Glyn, after Santander abandoned plans to buy the business.
After pumping more than £45 billion of taxpayers’ hard-earned money on Royal Bank of Scotland without the desire results, should the people of United Kingdom asked to bailout the bank again? Perhaps the bank should be closed down for good. But before that, let’s see whether the Angela Merkel would rescue Deutsche Bank – using money contributed by EU members.
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