RBS tries for last-minute settlement before investor court case

Thousands of investors allege bank misled them over 2008 capital increase

Royal Bank of Scotland (RBS) has tried to reach a last-minute settlement with a group of investors who allege that the lender misled them over a 2008 capital increase, according to two people close to the matter.

A successful settlement would save RBS from a lengthy and potentially embarrassing trial, at which its former chief executive Fred Goodwin would face scrutiny over his decision-making and leadership at the time of the lender's near-collapse.

A civil trial brought by thousands of RBS investors is due to open on Monday, with the plaintiffs alleging that the bank’s former executives gave a misleading picture of RBS’s financial health ahead of a $12 billion (€13.9 billion) cash call in 2008. Months after the cash call, RBS had to be rescued by the government with a £45.8 billion (€53.2 billion) bailout.

RBS, which remains more than 70 per cent state-owned, denies any wrongdoing over the 2008 rights issue and says that its former bosses did not act illegally.


The bank has already settled with 87 per cent of investors who originally brought the case, but an outstanding group have so far rejected its offers and said they were determined to go to court.


By almost doubling the amount it has offered to the last shareholders seeking damages, RBS is close to a sum they would accept, one of the sources said, indicating that they may be willing to settle if RBS increases its offer to 100 pence.

“We won’t move unless they go that little bit further,” the source said.

The outstanding group represents about 9,000 retail shareholders and 20 institutional investors. The large investors include US bank Wells Fargo, the Boeing pension fund, Bank of America Merrill Lynch and local British council pension funds.

The sources said that RBS chief executive Ross McEwan was directly involved in negotiations over the weekend and that the bank had offered more than 80 pence for each RBS share held, though it is not clear if any of the investors have agreed to accept the offer.

RBS declined to comment on the settlement offer.

A spokesman for the shareholder action group said he was not immediately able to comment.

– (Reuters)