The Serious Fraud Office may be laying the ground work for a criminal investigation into the Royal Bank of Scotland after a government adviser claimed the bank engineered businesses into default while profiting from their struggles.
According to five unnamed sources cited by the Financial Times, the SFO has conducted interviews with former executives of UK companies affected by RBS' Global Restructuring Group (GRG), the business which manages the bank's riskier loans.
"The only thing we're saying is that we're aware of the issue and we are monitoring developments," said a spokesperson for the SFO.
RBS declined to comment.
Lawrence Tomlinson, an adviser to Britain's business secretary Vince Cable, claimed that RBS pushed businesses into default after moving them into its GRG.
He added that the 81% government-owned RBS also profited from their struggles as by moving them into GRG, this can create more revenue for the bank through higher fees and margins.
It can also result in the purchase of devalued assets by its property division, West Register.
Tomlinson runs LNT Group, based in the north of England which has annual revenue of £100m and has interests in construction, software, car manufacturing, and care homes.
"If the banks are engineering defaults as is suggested in the following sections of this report, it is important to remember that this closes all doors for the business," said Tomlinson in his report.
"Once they are moved into GRG they are considered risky. With the increased margins and fees, their cash flow will also be impaired, again making their proposition look less attractive to a competitor bank - even if the business has been artificially distressed due to the actions of the bank.
"If they have been missold a swap, the contingent liability of that swap on their assets may outdate the length of their facility agreement with the banks too.
"When it comes to moving banks they are unable to do so as their assets are all secured against the swap and there is therefore no security available for the new lender. The business will therefore not be able to meet the risk profile of the potential new bank and they are stuck with whatever terms their current bank offers, however onerous they may be."
Multiple Authorities Call for Reviews
After the release of Tomlinson's report, RBS drafted in heavyweight lawyers to review the treatment of small-to-medium sized enterprises (SME).
According to a statement by RBS' newly installed chief executive, Ross McEwan, the bank has appointed Clifford Chance to help its inquiry into the treatment received by SMEs in financial distress.
"To ensure our customers can have full confidence in our commitment to them I have asked the law firm, Clifford Chance, to conduct an inquiry into this matter, reporting back to me in the new year," said McEwan.
Bebb, who is the MP for Aberconwy in Wales, told IBTimes UK that it was unsatisfactory that RBS intended to conduct an internal review of its behaviour following the adviser's accusations and has called for an independent inquiry.
"I am appalled by RBS's weak reaction to The Tomlinson Report. It was clearly set out in the report that conflicts of interest were a key problem within our current banking sector and yet RBS have inadequately agreed to hold an internal investigation," said Bebb.
Meanwhile, Britain's former Bank of England deputy governor says the regulator is likely to take action against the RBS if accusations that the lender engineered business bankruptcies for profit, are proven to be true.
Large, who is leading an independent report into RBS, says the bank had taken the findings of his report and Tomlinson's, "very seriously".