It is not a good week for RBS, if it ever is. After yesterday's Bank of England report on the hole in bank balance sheets, a law suit has just been filed against them, with 21 claimants going after millions.
It concerns the moment when arguably, it all went wrong for the bank - when investors were persuaded to buy millions of pounds worth of new shares in the bank in April 2008. It was designed to shore up RBS finances after credit had started to dry up, and after mammoth deal taking over ABN Amro, the Dutch bank that went so badly wrong.
Those suing say the bank broke the rules by saying that fundamentally RBS was in decent shape, when the reality was very different. Had they been open about what was really going on, they claimants argue, many fewer investors would have bought the shares.
Of course what happened after was that the bank basically ran out of money, the value of the shares went through the floor, and the bank had to be bailed out. Many thousands of people lost their savings, millions disappeared.
The claim that has just been filed is on behalf of big institutional investors, pension funds and the like who are trying to get their money back. But I understand that a much bigger claim, going after billions on behalf of ordinary savers could be made too against the bank. Time and again, the cost of mistakes of the past just prove more and more expensive.
Here are the details of today's claim.
The claim concerns the Rights Issue of April 2008 under which The Royal Bank of Scotland sold shares at £2 per share. The claimants allege that the prospectus on which the Rights Issue was based was defective in that it contained material mis-statements and omissions.
The claimants maintain that although the prospectus portrayed an image of the bank being in a state of financial good health and stability, the reality was very different and that had the truth been known, the take up of shares under the Rights Issue would have been severely impacted.
Section 90 of the Financial Services and Markets Act 2000 stipulates that prospectuses and other documents of this kind must be accurate.
The claimants have based this claim on Section 90 which, in short, gives them a right to compensation for any losses they might have sustained as a result of the defective prospectus.
– Clive Zietman, Head of Commercial Litigation at Stewarts Law
Unless the matter can be resolved amicably, the claimants intend to pursue this litigation vigorously and through to trial in order to seek appropriate redress