Spotlight Tue 12Th May

[BelfastVI]

Anybody see that?

[Shotoflight]

I saw it. Not convinced it was all the fault of the banks shafting 'naive' developers. Little sympathy, as a taxpayer, obviously.

http://www.bbc.co.uk/news/uk-northern-ireland-27412040

But the party was over. Property values began to slide. And the small print attached to loans became a big deal.

I'll bet it did.

"I had invested in five houses for my kids, but the bank got them all."

[little fish]

I saw it. Not convinced it was all the fault of the banks shafting 'naive' developers. Little sympathy, as a taxpayer, obviously.

http://www.bbc.co.uk/news/uk-northern-ireland-27412040

But the party was over. Property values began to slide. And the small print attached to loans became a big deal.

I'll bet it did.

"I had invested in five houses for my kids, but the bank got them all."

Just watched it.

The small print is always a big deal, or it should be, equally for both parties. The issues being investigated by the FCA include cases where it was the Ulster Bank who was (allegedly) the party in breach of the small print on their contracts. It may well be that the majority of the business’s which went into insolvency were headed that way anyway, regardless of UB’s recovery actions. If, on the other hand UB is found to have breached its own contracts and written agreements and knowingly and deliberately set about destroying viable business’s then I would have every sympathy with those business’s.

I certainly don’t have enough faith in the banking industry to think that they would never bend or break the rules (even their own) to benefit themselves.

http://www.bbc.co.uk/iplayer/episode/b043nncb/spotlight-13052014

[BelfastVI]

zero sympathy here. If you have to borrow money to buy 5 houses for your kids then you take a big risk. No gain without pain.

These were the houses Polly had purchased, outside the company for his children. He had not borrowed from UB for these and may not have borrowed at all. They were taken as his PG's were called.

[BelfastVI]

I don't expect any sympathy for the developers, ya takes your chances. However, it is implied strongly that the bank moved too quickly and went for 'sure ducks' whilst leaving plenty of zombies in place.

[2buyornot2buy]

These were the houses Polly had purchased, outside the company for his children. He had not borrowed from UB for these and may not have borrowed at all. They were taken as his PG's were called.

Zero sympathy. Should have taken some professional advice when he signed the PG.

Buy some houses in the good times and can't pay during the bad. Bye Bye houses. What's the problem?

The company was going since the 60s. He'll have understood what a director guarantee was.

[BelfastVI]

Zero sympathy. Should have taken some professional advice when he signed the PG.

Buy some houses in the good times and can't pay during the bad. Bye Bye houses. What's the problem?

The company was going since the 60s. He'll have understood what a director guarantee was.

I don't think that was what he was complaining about, or indeed what the show was about. The show, and the UK report of GRG was implying that companies were 'targeted and taken down' for their assets. The 'insider' claims that they were chosen and forced into an insolvent position so they could be stripped.

[Shotoflight]

He wouldn't have bought his own houses - as buyers dried up and prices plummeted - in an attempt to retain 'momentum' in an overpriced development. Nah, I'm sure he bought somone elses houses as investments for his 'kids'. I'm far too cynical.

[BelfastVI]

He wouldn't have bought his own houses - as buyers dried up and prices plummeted - in an attempt to retain 'momentum' in an overpriced development. Nah, I'm sure he bought somone elses houses as investments for his 'kids'. I'm far too cynical.

I don't think you are cynical, perhaps just uninformed.

[Shotoflight]

BVI - uninformed is 100% correct - just thinking aloud.

If it was me, it is like something I would do. Ie why by others' houses when you can buy your own at cost and create 'demand' (unless yours are carp?).

No doubt the business (and others - not just this example) would have had finance advisors and legal advisors as well as years of 'hard earned' experience. We may never know what happened and, in any event, the programme was about the other party in this equation - the bank.

Would love a programme from the bank's point of view for balance but customer confidentiality and market confidence would probably militate against this. In addition, they are probably happy to keep their heads down given their role.

Many parties got too big for their boots but only one group were "too big to fail". Hardly fair?

[BelfastVI]

BVI - uninformed is 100% correct - just thinking aloud.

If it was me, it is like something I would do. Ie why by others' houses when you can buy your own at cost and create 'demand' (unless yours are carp?).

No doubt the business (and others - not just this example) would have had finance advisors and legal advisors as well as years of 'hard earned' experience. We may never know what happened and, in any event, the programme was about the other party in this equation - the bank.

Would love a programme from the bank's point of view for balance but customer confidentiality and market confidence would probably militate against this. In addition, they are probably happy to keep their heads down given their role.

Many parties got too big for their boots but only one group were "too big to fail". Hardly fair?

the programme was about the banks role (one in particular), not in the boom or crash (which would make a good programme) but on their actions in 'taking out' companies that could have survived'. Taggarts may not have been the programme makers best choice as it is doubtful if he would have survived as he acquired most of his land at the top of the market. however, he will no doubt argue that there were others equally as geared and indebted still in existence. weather they should be is another story.

The show was based on a report (which RBS commissioned themselves) into their own actions. the bank may have been quite surprised that the report was very scathing on the actions of GRG, more than implying that they went for asset rich companies and stopped their cash flow.

I don't particularly care about how the company came to be a debtor. however, if they had the cash flow, via trading or reserves to keep paying the bills they should have been allowed to do so.

[little fish]

the programme was about the banks role (one in particular), not in the boom or crash (which would make a good programme) but on their actions in 'taking out' companies that could have survived'. Taggarts may not have been the programme makers best choice as it is doubtful if he would have survived as he acquired most of his land at the top of the market. however, he will no doubt argue that there were others equally as geared and indebted still in existence. weather they should be is another story.

The show was based on a report (which RBS commissioned themselves) into their own actions. the bank may have been quite surprised that the report was very scathing on the actions of GRG, more than implying that they went for asset rich companies and stopped their cash flow.

I don't particularly care about how the company came to be a debtor. however, if they had the cash flow, via trading or reserves to keep paying the bills they should have been allowed to do so.

Absolutely - well put.

[Shotoflight]

The bank did not participate in this programme. If companies come on with sob stories blaming someone else I would like the whole story, both the background and the bank's version, however much as I would rate the work of a BBC researcher with a narrative to push.

So the bank is accused of picking off some low hanging fruit. That's their perogative.

Did they break the law? Has this been proven? Are they being taken to court? Do you know the full story? How do you know they could have survived - they thought they could, the bank thought they couldn't - or didn't care.

Cest la vie.

[little fish]

The bank chose not to participate.

http://tomlinsonreport.com/docs/tomlinsonReport.pdf Business Minister commissioned report

From the cases I have heard, it is clear that a perception has arisen that the intention is to purposefully distress businesses to put them in GRG and subsequently take their assets for the West Register at a discounted price. This needs to be addressed and the conflict of interest removed.

The Clifford Chance report commissioned by RBS

http://www.huffingtonpost.co.uk/2014/04/17/rbs-clifford-chance-tomlinson-report_n_5167333.html

The Clifford Chance report reveals that RBS' internal valuations of businesses were not carried out in accordance with best practise as laid out by the Royal Institute of Chartered Surveyors, saying: "Internal valuations were not carried out to the standard of the Red Book, but they were undertaken according to set assumptions by qualified surveyors employed by the bank.

Clifford Chance "identified a number of other cases where a customer had been transferred to BRG [business Restructuring Group] without an event of default having occurred.” In short, the firms were not struggling with their loans, but were still deemed to need help.

FCA - currently investigating although some concerns have arisen by the FCA's decision to have the investigation run by a Clifford Chance representative.

http://www.rbs.com/news/2014/01/clifford-chance-review.html

Speaking on Channel 4 News on Monday, Jesse Norman, MP for Hereford and Herefordshire South, admitted that all 650 of the country’s MPs share a dirty little secret – that their inboxes have for the past four years, been stuffed full with emails from constituents complaining that RBS has snuffed out their livelihoods and destroyed their businesses

Above quote and a good over view of the situation from here (2012 updated 2013).

http://www.ianfraser.org/the-financial-terrorism-of-royal-bank-of-scotland/

Edited May 20, 2014 by little fish

[Shotoflight]

So, no proof of illegality then.

[little fish]

Wow

[Shotoflight]

Let the courts decide.

[2buyornot2buy]

the programme was about the banks role (one in particular), not in the boom or crash (which would make a good programme) but on their actions in 'taking out' companies that could have survived'. Taggarts may not have been the programme makers best choice as it is doubtful if he would have survived as he acquired most of his land at the top of the market. however, he will no doubt argue that there were others equally as geared and indebted still in existence. weather they should be is another story.

The show was based on a report (which RBS commissioned themselves) into their own actions. the bank may have been quite surprised that the report was very scathing on the actions of GRG, more than implying that they went for asset rich companies and stopped their cash flow.

I don't particularly care about how the company came to be a debtor. however, if they had the cash flow, via trading or reserves to keep paying the bills they should have been allowed to do so.

Asset rich and geared? I'm assuming they were in breach of their lending covenants.

[BelfastVI]

I'm assuming they were in breach of their lending covenants.

I'm sure you are 100% correct. Therefore if they breached a covenant, such as 80% debt to worth, then off with their heads.

[2buyornot2buy]

I'm sure you are 100% correct. Therefore if they breached a covenant, such as 80% debt to worth, then off with their heads.

How do you deal with contract breaches?

[BelfastVI]

How do you deal with contract breaches?

it depends how serious the covenant breach is. The impression the programme was given was the bank were using this as an excuse to bring companies, particularly with other assets, down

[2buyornot2buy]

it depends how serious the covenant breach is. The impression the programme was given was the bank were using this as an excuse to bring companies, particularly with other assets, down

But it's not an "excuse". Let's call it what it actually is. A breach of a contractual obligation agreed between two consenting parties.

If they didn't sign up to the covenant, they would not have got the loan.

Edited May 21, 2014 by 2buyornot2buy

[BelfastVI]

But it's not an "excuse". Let's call it what it actually is. A breach of a contractual obligation agreed between two consenting parties.

If they didn't sign up to the covenant, they would not have got the loan.

There are many breaches to many forms of contract, insurance policies mortgages etc. Many of these are described as technical breaches and over time can be rectified. If its serious that's another matter. It was the programmes point that the bank were acting wrongly in using these breaches to pick off assets, at under value for themselves. It actually implied that they were forcing companies into a more serious breach, by cutting off their cash supply. the way they done it was to take all the incoming cash and not allow any to go out. within a matter of weeks a unpaid supplier would issue a wind-up notice and the bank would have no choice to appoint to protect its security.

[2buyornot2buy]

There are many breaches to many forms of contract, insurance policies mortgages etc. Many of these are described as technical breaches and over time can be rectified. If its serious that's another matter. It was the programmes point that the bank were acting wrongly in using these breaches to pick off assets, at under value for themselves. It actually implied that they were forcing companies into a more serious breach, by cutting off their cash supply. the way they done it was to take all the incoming cash and not allow any to go out. within a matter of weeks a unpaid supplier would issue a wind-up notice and the bank would have no choice to appoint to protect its security.

This is a B2B transaction.

It is expected (rightly so) that businesses taking out loans take a certain level of advice. That advice should have and would have included advice on what would happen in the event of loan covenant breach. The business, as a commercial entity does not have the same protection offered to a customer. The entity will be held to a higher standard.

I'm not sure a commercial judge would turn a blind eye to a "technical" breach from one party. The bank will have assessed the risk of default when the loan was originally offered, if the risk profile changed and the business was in breach of this covenants but still had assets, it's reasonable for the bank to mitigate it's losses.

[BelfastVI]

This is a B2B transaction.

It is expected (rightly so) that businesses taking out loans take a certain level of advice. That advice should have and would have included advice on what would happen in the event of loan covenant breach. The business, as a commercial entity does not have the same protection offered to a customer. The entity will be held to a higher standard.

I'm not sure a commercial judge would turn a blind eye to a "technical" breach from one party. The bank will have assessed the risk of default when the loan was originally offered, if the risk profile changed and the business was in breach of this covenants but still had assets, it's reasonable for the bank to mitigate it's losses.

that is of course the line the bank will trump out. Proportionality is the key here and did the bank, by their intervention force the breach or escalate the breach into a more serious technical insolvency?

there are many mortgages out there with a 80% L2V convent. Therefore the mortgagee, whilst still in positive equity and still making repayments may be technically in breach if the bank commissioned a valuation that showed that the L2V was now 85% or 95%. By your argument it is off with their heads. I would argue that it would be totally unreasonable to do that. However banks use such things to place people on higher rates (as if that will help the borrower).

Its the same for business. In such a instance, the programme tells us business were placed in GRG, 'to help them'. however control of payments was taken away from the companies. Increased fees and enhanced security was obtained.

Was that right? you decide.