Bank of England governor key architect in RBS scandal which left businesses in ruin
The Bank of England’s governor, Andrew Bailey, failed to declare a potential conflict of interest during his application for the central bank top job.
At his previous employer, the Financial Conduct Authority (FCA), Bailey played an architectural role in designing the framework for a government scheme accused of leading small and medium-sized enterprises (SMEs) into financial ruin.
According to The Times, the government scheme Bailey part-created – the Asset Protection Agency (APA) – drove UK bank RBS’s “aggressive” approach against its business customers.
The bank moved 16,000 SME customers to its Global Restructuring Group (GRG). This saw some 90% of these customers suffer from mistreatment.
One internal email, sent by an RBS banker within the group, suggested “sometimes you need to let customers hang themselves”.
The APA operated under the UK’s Treasury and insured £280 billion worth of RBS’s loans between 2009 and 2012.
When the loans went bad, the government scheme allegedly pressured the bank to withdraw them from business customers and take their assets.
Derek Sach, who ran the bank’s GRG division, alleges the APA had no interest in customers. He says it wanted the bank to “flog” businesses to secure at-risk government capital reduction objectives.
After authoring the framework for this agency at the FCA, Bailey applied for his next role at the Bank of England. During the application process, he did not declare his involvement in the RBS scandal.
Neither MPs, nor FCA reports – signed off by Bailey – which discussed the scheme, were made aware.
At a 2009 Treasury select committee hearing, then Bank of England governor, Mervyn King, was asked about the APA – which was not yet exposed for fuelling misconduct.
King deferred to Bailey, the central bank’s chief cashier at the time. The governor referred to Bailey as “working most closely with the Treasury on the design” of the scheme.
As well as these accusations, Bailey is also facing accusations by a Dame Elizabeth Gloster-led review. It says the Bank of England’s governor holds shared responsibility for the £238 million collapse of London Capital & Finance (LCF).
The company’s fall into insolvency happened during Bailey’s time at the helm of the FCA.