RBS shareholders to sue directors

[David Guyatt]

It should be the government prosecuting a criminal fraud case of course - but there are no balls in Whitehall to take on the City - but at least it's a beginning. Having said that, past examples of private suits like the Barings Bank affair don't give a lot of hope.

http://news.bbc.co.uk/1/hi/business/8300539.stm

RBS shareholders to sue directors



Disgruntled shareholders in the Royal Bank of Scotland have decided to take legal action against the bank's former directors for up to £9bn.

They claim to have been misled about the health of the bank, now 70% owned by the taxpayer, when they were asked to invest money in April 2008.

An action group working for thousands of shareholders said they would target directors from the time of the buyout.

Bradford and Bingley shareholders are also meeting over a compensation case.

RBS's balance sheet was weakened by its purchase of Dutch bank ABN Amro under former boss Sir Fred Goodwin.

Shareholders were asked to buy new shares at 200p each to strengthen its finances, with 95% of the stock being bought up.

But in the wake of the Lehman Brothers collapse and the government rescue, the bank's share price fell to an all-time low of 10p in January. On Friday, they were trading at 48p.

'Past mistakes'

RBS action group spokesman Roger Lawson said it was seeking to raise funds for legal advice about the strength of a potential claim.

He said the prospectus for the rights issue underestimated the risks facing the group.

Although the justification for the rights issue was to boost its finances, Mr Lawson described it as a "bailout to fund (the bank's) past mistakes".

Meanwhile, the B&B shareholders claim they have not been offered an explanation by the government for the company's nationalisation in September last year.

The Treasury decided the B&B was no longer a viable bank, after the collapse in the share price, and a run on its deposits by customers.

The group's savings business was sold to Spanish banking giant Santander. Compensation to the shareholders is to be assessed by an independent valuer.