Royal Bank of Scotland is dismantling its controversial restructuring division, with its head Derek Sach and another executive leaving the bank in spring 2015.
Sach and Aubrey Adams, who runs the property unit within the global restructuring group (GRG), are leaving at the end of next March. Laura Barlow, who currently heads up the restructuring team for the UK and US within GRG, has been appointed as head of RBS’s restructuring division with immediate effect.
GRG, which deals with companies facing collapse, has faced a barrage of criticism, notably from Lawrence Tomlinson, an adviser to the business secretary, Vince Cable. He concluded in a report last November that the unit forced viable small businesses to the brink so that the bank could buy up their properties and make a profit. RBS then commissioned law firm Clifford Chance to investigate the claims. Its report said RBS did not deliberately defraud customers. The Financial Conduct Authority is also investigating.
The move to close GRG as a standalone unit comes in the wake of the UK’s economic recovery, which has led to a sharp drop in the number of restructuring cases. A few weeks ago, the RBS chief executive, Ross McEwan, said the number of cases being referred to GRG had dropped by 40%. RBS has set up an internal bad bank, which has taken on a lot of GRG cases.
The division dealt with a number of big turnaround cases, including luggage maker Samsonite, Liverpool FC and Thomas Cook.
Sach and Chris Sullivan, the bank’s deputy chief executive, denied GRG was run as a profit centre when interrogated by MPs on the Treasury select committee in June. In a letter to committee chair Andrew Tyrie, Sullivan subsequently admitted that the operation was run this way in terms of its accounting basis.
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