Taxpayers are funding the Royal Bank of Scotland Group plc’s (LON:RBS) lawsuit over its 2008 rights issue and bankers responsible for the financial crash seem to have gotten away scot-free, said Sir Vince Cable.
In a column for City AM, the former Business Secretary said RBS chief executive Ross McEwan was likely to face a grilling over the bank’s £12bn rights issue at today’s annual meeting.
As many as 9,000 retail investors are suing RBS for allegedly misleading them over the lender’s true financial woes during the rights issue. It was meant to stabilise the bank but the government had to spend £45.5bn to bail it out.
Then-chief executive Fred Goodwin will take the witness stand in court on 8 June, conveniently the same day as the general election. The trial starts on 22 May.
Cable said he had "always thought Fred Goodwin should see the inside of the court room" and that much of the public cynicism about the government, regulators and bankers stems from the fact that those who did most of the damage during the 2008-09 financial crisis had gone unpunished.
He said government still holds a 72% stake in RBS so taxpayers are paying for Goodwin's legal costs, which was estimated at £6.5mln last year. Claimants are seeking £700mln.
“The bank will have spent more than £125mln on this case when the trial ends later this year – one of the biggest fees in British legal history," Cable wrote.
“As I have noted before, this expenditure is obscene. The Treasury, as majority shareholder, should have intervened. Chancellor Philip Hammond and McEwan must both now wonder whether that money would have been better invested in a settlement."
Last month Hammond signalled that the public will make a loss when the government sells its stake as it was likely to fetch a far lower price for shares than it paid in its bailout.
The Chancellor told MPs: “We have to live in the real world and make decisions on the future of our holding in RBS in the best interests of taxpayers.”
He said the government plans to return the bank to private hands as soon as it can achieve fair value for the shares, recognising that this could well be below what the previous government paid for them.