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Adding insult to injury as in the title of this blog is not within the remit of The Angle, but it would appear that the last thing that long suffering RBS (RBS) shareholders need after nearly 5 years of suffering several more years of pain in the form of legal wrangling and expenses could be on its way. Yes, they have lost 90% of the value of their shareholders due to Fred The Shred, and yes, what the former Knight of the Realm did was bad decision making to put it kindly. However, going to the law courts is the best way of not only losing the 10% they have left, but much more.
One theory is that the reason the banking sector was singled out for salvation in the wake of the Credit Crunch (as opposed to say JJB Sports, HMV, Game Group or anyone else) is that apart from the public concern that bankers should always lead a luxury lifestyle and be rewarded for failure, the banks are among the legal profession’s best clients.
Many politicians are also former lawyers. After all, how many people have successfully sued a bank and won, for instance, to avoid being repossessed? The only time banks lose is via regulators, via fines (which we pay for anyway), and not through either the civil courts or where “Sir” Fred should really be – in the criminal courts. Funny that? And of course, there will still be scandal after scandal unless and until a leading bank is actually closed down.
But unless it is foreign and hence shady, like BCCI, this will never happen, largely because those who work at regulators such as the FSA usually use this as a stepping stone to a career in the City and do not want to bite the hand that will eventually be feeding them.
Therefore, suing a bank is likely to be a losing game. But another losing battle is to try and sue a bank belong not to some faceless City institutions / pension funds, or even Qataris like our dear friends at Barclays (BARC), but a nationalised bank. Here we have the egos of the Treasury / Coalition Government who have poured taxpayers’ money without asking permission, and public opinion which on financial matters is notoriously easy to manipulate as we are dealing with complex matters.
On this basis it is impossible to envisage even in a post Libor environment that the reported £3.3bn legal threat which has emerged will ever see the light of day, or even if it does, win. Any jury will just see greedy, silly shareholders duped by greedy and even more silly bankers who desperately got away a £12bn rights issue in 2008 after committing themselves to the ABN Amro takeover where to back down would have meant too much damage to their pride and no doubt their CVs.
Clearly, the best and cheapest way forward for the RBoS Shareholders Action Group is to swallow its own pride, its losses and heed perhaps the wisest words of Latin there are – Caveat Emptor. Maybe switching to Barclays with what cash they have left could be the way forward? Now that is a solid name.
