Why?

It comes as no surprise that the Royal Bank of Scotland has had to set aside the £3.1 billion in order to make provision for the claims against it in relation to what really amounts to its fraudulent behaviour towards its customers.

Some of the money, £1.9 billion, is to pay the fines and compensation for mis selling mortgage bonds in the United States of America. The bonds of course were mainly sold to its customers. Included in the £1.9 billion are penalties that the Royal Bank of Scotland expects to have imposed upon it for manipulating financial markets.

£650 million of the provision relates to compensating people who were fraudulently sold payment protection insurance and £500 million is set aside to compensate people who were fraudulently sold interest-rate hedging products such as swaps and derivatives; in this case the targets were small businesses.

In addition to setting aside the £3.1 billion the bank expects to lose, or have losses crystallised, on bad loans and investments amounting to £4.5 billion. This is a sorry tale of a bank run incompetently. Even when the bank was doing something crooked, such as selling interest-rate swaps to people who never understood what they were buying, the bank could not do it competently.

The bill for all this crooked incompetence has landed through the letter boxes of the taxpayers of the United Kingdom. The economic damage caused by this behaviour to the people and economy of the United Kingdom has been immense. One study estimated that by selling swaps to small and medium-sized businesses, it has caused so much economic damage that more than 400,000 jobs have been lost as the businesses struggled to pay their obligations on the swaps.

When announcing these figures and provisions the chief executive of the Royal Bank of Scotland tried to sugar coat the bitter pill by saying that most bank executives would not be receiving bonuses this year. This merely illustrates how detached the bank’s leadership is from the feelings of the people of the United Kingdom. Most people do not understand why the executives have not had their ill-gotten gains taken away from them and why they have not served prison terms for their behaviour. We shall continue to fail to understand this and draw scant comfort from the fact that some of the already overpaid bank executives of the Royal Bank of Scotland are not getting their bonuses this year.

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