Royal Bank of Scotland faces court battle with shareholders

Ulster Bank parent has settled most of £700m lawsuit over near-collapse in 2008

RBS’s  spiralling legal costs in defending the €700m lawsuit have drawn sharp criticism, as the bill escalates towards £125 million – including £6.5 million defending former boss Fred Goodwin and the ex-RBS directors. Photograph: Simon Dawson/Bloomberg

RBS’s spiralling legal costs in defending the €700m lawsuit have drawn sharp criticism, as the bill escalates towards £125 million – including £6.5 million defending former boss Fred Goodwin and the ex-RBS directors. Photograph: Simon Dawson/Bloomberg

 

Royal Bank of Scotland is bracing for a costly court battle with shareholders that will see former boss Fred Goodwin defend his role in the lender’s near-collapse during the financial crisis.

Mr Goodwin and a raft of former executives are in line for a public grilling as part of a £700 million lawsuit brought against the lender – the parent of Ulster Bank – by 9,000 retail investors and 18 institutions in the RBS Shareholder Action Group.

While settling the lion’s share of the claims out of court, RBS is now heading for a 14-week trial which begins on Monday.

The disgraced former chief executive – who was stripped of his knighthood following the bank’s near-collapse – will answer questions over the events leading up to the British government’s £45.5 billion bailout nine years ago.

Rights issue

The legal action centres on a rights issue overseen by Mr Goodwin in April 2008 when RBS asked existing shareholders to pump £12 billion into the bank after leading a consortium that spent £49 billion on Dutch bank ABN Amro.

Shareholders claim they were left nursing hefty losses following the cash call after RBS shares plunged 90 per cent and the London government was forced to step in when the deal turned toxic.

Despite the bank making significant headway in resolving the dispute, it has been unable to strike a deal with the last tranche of shareholders, with any chance of a last-ditch settlement proving a distant hope.

Former Royal Bank of Scotland chief executive Fred Goodwin, who was stripped of his knighthood, will defend his role in events leading up to the bank’s £45.5 billion bailout by the British government. Photograph: David Moir/Reuters
Former Royal Bank of Scotland chief executive Fred Goodwin, who was stripped of his knighthood, will defend his role in events leading up to the bank’s £45.5 billion bailout by the British government. Photograph: David Moir/Reuters

General election

Mr Goodwin will be cross-examined on June 8th, the day of the UK general election.

The bank is legally obliged to provide lawyers for the former directors, but the lender’s legal costs have drawn sharp criticism, as the bill escalates towards £125 million – including £6.5 million defending Mr Goodwin and the ex-RBS bosses. Three members of the influential Treasury Select Committee warned in April that RBS could face a parliamentary inquiry into the spiralling legal costs, which will make it one of the most costly civil defences in British history.

– (PA)