By Max Colchester
LONDON-- Royal Bank of Scotland Group PLC is disbanding its
controversial Global Restructuring Group, according to people
familiar with the matter.
Derek Sach, the head of the division, will leave the bank, as
will Aubrey Adams, who heads up the property function within GRG,
these people say.
Laura Barlow has been appointed to head up RBS's restructuring
activities. Her team will work alongside the group's existing
businesses to help clients who are struggling with repayments. Some
of the asset that are currently being restructured are being moved
to the state-owned bank's "bad bank," these people say.
In November last year Lawrence Tomlinson, an adviser to the U.K.
government's department for Business Innovations and Skills, said
in a report that RBS's GRG unit regularly forced business customers
to default on loans so that the bank could charge higher fees or
seize their properties and sell them. The report sparked a
political row over the 80% government-owned bank's treatment of
small businesses. RBS commissioned law firm Clifford Chance to
investigate the allegations. The report said that RBS didn't
systematically defraud customers. The Financial Conduct Authority
is conducting its own probe into the matter.
Following the financial crisis the number of customers being
referred to RBS's GRG unit rose. The GRG unit operated as a stand
alone business, employing several hundred people across the world.
A report commissioned by the bank on its business lending found
that fewer than 10% of businesses referred to the GRG unit end up
in bankruptcy. But its author, former Bank of England Deputy
Governor Andrew Large, said there is a potential conflict of
interest at GRG because it selects the struggling businesses it
works with from RBS's larger base of customers, and aims to
generate a profit.
RBS has already announced that it will now wait longer before
charging small businesses that default a higher interest rate. The
bank also closed its West Register unit, which both advises
distressed businesses on property matters and bids for their
properties.
The latest decision comes as the British economy improves and
the number of restructuring cases has fallen. Earlier this month
RBS CEO Ross McEwan said that the number of cases being referred to
the GRG unit had dropped about 40%. GRG's 670 staff will continue
to work under Ms. Barlow.
Mr. Sach, who helped oversee a raft of turnarounds, including
that of luggage maker Samsonite, will leave the bank next March.
"Derek has had a hugely successful career," said one person close
to the bank.
Write to Max Colchester at max.colchester@wsj.com
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