The Dash For Cash: Leaked Files Reveal RBS Systematically Crushed British Businesses For Profit

The Royal Bank of Scotland killed or crippled thousands of businesses during the recession as a result of a deliberate plan to add billions of pounds to its balance sheet, according to a leaked cache of thousands of secret documents.

The RBS Files – revealed today by BuzzFeed News and BBC Newsnight – lay bare the secret policies under which firms were pushed into the bank’s feared troubled-business unit, Global Restructuring Group (GRG), which chased profits by hitting them withmassive fees and fines and by snapping up their assets at rock-bottom prices.

The internal documents starkly contradict the bank’s public insistence that GRG acted as an “intensive care unit” for ailing firms, tasked with restructuring their loan agreements to “help them back to health”.

RBS has repeatedly denied allegations that it destroyed healthy businesses for profit – first raised in a damning report on its treatment of small-and medium-sized enterprises (SMEs) by the government adviser Lawrence Tomlinson three years ago. The bank paid the magic circle law firm Clifford Chance to conduct an “independent investigation” that found “no evidence” of the claims, and an official inquiry by the banking regulator has been long delayed.

The RBS Files now reveal for the first time that, under pressure from the government, the taxpayer-owned bank ran down businesses in its restructuring unit as part of a deliberate, premeditated strategy to cut lending and bolster profits. And they show that GRG, ignoring repeated warnings about conflict of interest, collaborated closely with the bank’s own property division, West Register, to buy up heavily discounted assets it had forced its customers to sell.

When confronted with the leaked evidence last week, the bank made its first majoradmission: “In the aftermath of the financial crisis we did not always meet our own high standards and let some of our SME customers down.” But it continued to deny that it had “targeted businesses to transfer them to GRG or drove them to insolvency”.

The files reveal that 16,000 firms were sucked into the restructuring unit after the financial crash – including care homes, hotels, farms, and children’s centres. BuzzFeed News has spoken to 15 small-business owners who say their healthy firms were ruined after they were put into GRG. Some have lost their homes, marriages, and health as well as the companies they built from scratch and all their assets.

The documents – comprising internal emails, confidential memos, secret policy documents, minutes, and financial records leaked from inside the bank by an anonymous whistleblower – today show:

• RBS managers encouraged employees to hunt for ways to boost their bonuses by forcing customers into loan restructuring in order to extract heavy fees as part of a profit drive nicknamed “Project Dash for Cash”.
• Firms that had never missed a loan payment were pushed into GRG under the bank’s secret policies for reasons that had nothing to do with financial distress, including for telling RBS they wanted to leave the bank, falling out with managers, or threatening to sue over mistreatment.
• Once in GRG, firms were hit with crippling fees, fines, and interest rate hikes that could run into seven figures, helping to net the restructuring unit a profit of more than a billion pounds in a single year.
• Contrary to claims by the bank, there were no Chinese walls between GRG and West Register bosses, who sat together on both the controlling committee that held sway over which businesses were transferred into the restructuring unit and the property acquisition committee that signed off the bank’s bids for their distressed assets. Auditors repeatedly warned about perceived conflicts of interest in GRG.
• The property division, which amassed assets worth £3.3 billion during the crisis, was passed information that was not available to other bidders when it wanted to acquire properties from businesses in GRG. In contrast to what RBS executives told parliament, properties could be sold to West Register without being advertised on the open market.
• Staff were told to conceal conflicts of interest from customers when demanding cheap shares in their businesses or stakes in their properties.
• The revelations will pile pressure on the Financial Conduct Authority (FCA) to conclude itslong-delayed inquiry into RBS’s treatment of its small-business customers. Tomlinson, whose report triggered the FCA probe, said the documents obtained by BuzzFeed News “seem to prove that there was a policy within RBS to destroy businesses, to add value to their balance sheet through GRG”. He urged the regulator to act decisively: “Those people should now be brought to book.”
  Alison Loveday, who says her law firm Berg has dealt with “hundreds of cases” in which healthy firms were “devastated by GRG’s activities”, called on the FCA to take urgent action to ensure business owners are “properly compensated for the loss and damage they have suffered”. She blamed GRG’s heavy-handed tactics for causing “heart attacks, family breakdown, and even suicides”.
  The RBS Files raise serious questions about the basis on which Clifford Chance exonerated the bank in its 2014 report, which was welcomed by RBS chief executive Ross McEwan at the time as evidence that GRG was “a pretty good unit”. The documents also expose the hollowness of the evidence given to the Commons Treasury select committee by RBS executives, who told MPs the restructuring division’s “main objective is to restore the customers’ health and strength” and denied 27 times that it sought profit.
• Derek Sach, who headed GRG, and Chris Sullivan, the bank’s then deputy chief executive, testified that staff were not put under pressure to increase customers’ fees and that properties acquired by West Register were “always marketed on the open market” – claims the internal documents contradict.
  The bank’s chairman, Sir Philip Hampton, later had to write to the committee to withdraw the executives’ repeated assertion that GRG was “absolutely not a profit centre”, claiming they had made “an honest mistake”. The RBS Files reveal that both Sach and Sullivan were sent regular updates on GRG’s “profit and loss” performance, which itemised revenues from fees, interest rate hikes, and asset acquisitions that far exceeded its costs. Sach, who toldMPs that GRG “does not contribute to the bank’s profits at all”, was responsible for signing off internal documents thatdescribed the unit as “a major contributor to the Group’s bottom line”.
  The white-haired restructuring boss emerges from the documents as an all-powerful puppet master, simultaneously heading the management committee that held sway over which businesses were transferred into GRG, the West Register committees that decided which assets the property division should acquire, the asset purchase committees that signed off its major bids, and the risk and audit committee that scrutinised the restructuring division’s work. Repeated warnings from RBS’s external auditors about the “reputational risk” arising from this apparent conflict of interest were ignored. Sach declined to comment when contacted by BuzzFeed News.
  The documents show GRG staff were asked to split customers into two groups – those considered “viable” and those “the bank would like to exit”.
  “Viable” firms would have their debts restructured to boost the bank’s revenues and often be forced to surrender cheap stakes in their assets or equity to GRG’s investment arm. But if firms were considered a potential risk, even if they were not insolvent, staff were instructed to “exit” by “placing pressure on the company to repay the debt as soon as possible through refinancing, realisation of assets, and possibly commencing insolvency proceedings”.
• When assets were sold out of insolvency, often for dramatically discounted prices, West Register would be brought in to decide if it wanted to make a bid, with GRG managers privately guiding its staff on just on how much they would need to offer.
  RBS has repeated its denial that the property division profited by buying assets cheap and selling them on for an inflated price. But confidential internal audit documents note that West Register is “used by GRG to acquire property assets from distressed situations” and “seeks to exit properties via a future commercial sale in order to extract maximum economic value” that “can often result in a capital gain in relation to the original property acquisition”.
  In a statement, RBS said it had lost £2 billion on its loans to small and medium-sized businesses during the financial crisis. It said RBS did not make an overall profit from GRG’s activities – the restructuring unit’s revenues did not exceed the losses the entire bank suffered on business loans gone bad after the crash. But its statement acknowledged, for the first time, that “a number of our customers did not receive the level of service they should have done” in GRG.
  “We could have managed the transition to GRG better and we could have better explained to customers any changes to the prices or fees we were charging,” its statement said. “We also did not always handle customer complaints well. As a result, a number of our customers did not receive the level of service they should have done or, importantly, that they would receive now.” The bank also said it would change its internal policies so that a customer litigating against the bank would no longer be among its restructuring “triggers”.
• But RBS still insisted that “GRG’s role was to protect the bank’s position, where possible by working with distressed businesses to return them to financial health,” and said it had seen “nothing to support the allegations that the bank artificially distressed otherwise viable SME businesses or deliberately caused them to fail”.
  A cornerstone of RBS’s denial that it systematically destroyed small businesses has been the insistence that it had no reason to push good customers into difficulty. But the files reveal how government pressure to reduce its loan exposures, coupled with the opportunity to raid the cash, equity, and assetsof businesses going under, gave the bank a powerful incentive to pull the plug on thousands of its customers.
  The government and regulators pushed RBS to achieve three main goals after the bailout. First, they pressed the bank to reduce its exposure to property loans, which were a main cause of the financial crisis. Then they required RBS to increase its capital reserves as a buffer against losses. Finally, they pushed for the bank to make more money overall, so that it could increase its lending to new businesses to aid the economic recovery, and so the government could sell its ownership stake at a profit. RBS devised a strategy to do just that.
  The plan – which bosses told staff the government had “endorsed and agreed” – was to offload tens of billions of pounds’ worth of business loans that the bank had deemed “non-core”. It was widely hailed as an essential move to shore up the bank’s finances after the crash and protect the taxpayer’s investment.
  But the RBS Files now reveal GRG played a central role in the delivery of that plan, acting as a clearinghouse for many of those “non-core” businesses as the bank pushed them towards the exit door: generating bumper revenues by extracting massive fees and fines, clawing back loans secured against property, seizing chunks of their equity, and offloading their assets. Through West Register, the bank could acquire their prime properties at fire-sale prices, converting them from risky loan exposures into owned assets that the bank planned to sell off later for a capital gain. And, by quarantining the properties in a network of subsidiaries owned by West Register, the bank substantially reduced the amount of capital it had to freeze on its balance sheet as a regulatory buffer against potential losses, freeing up extra cash.
  The inside story of how that plan was put together in the teeth of the financial hurricane – and went on to cause misery for business owners across the country – is revealed today for the first time.
• As summer turned to autumn in 2008, panic was pulsing through Royal Bank of Scotland’s global headquarters in Edinburgh. The credit crunch had sunk its teeth deep into the bank’s balance sheet, and it was haemorrhaging money at a terrifying rate. The Scottish giant had swelled to become Britain’s biggest financial institution, amassing global assets worth £2.2 trillion in a period of frenzied acquisition during the boom years, but now it was perilously close to insolvency. Leaked emails reveal that, already, the British firms that banked with RBS were being made to feel the pain. Managers rushed to bleed business customers for extra fees and higher interest rates in a frantic drive to transfuse the bank with cash – and to bump up their own bonuses to boot.
• Rhydian Davies, RBS’s gregarious head of property in the south region’s corporate banking division, called a meeting of his managers and told them he had come up with a plan to get them through the tough times that September. Davies had a boyish fondness for nicknaming his initiatives with a touch of derring-do, so he had called his proposal “Project Dash for Cash”. The region was falling way behind on its financial targets, and it needed to use some clever tricks to squeeze more money out of its customers. “The only significant impact that can be made will be in cash fees,” he reminded them in afollow-up email after the meeting. “These will principally come in the form of restructuring/exit fees.” Davies was effectively asking his staff to rip up customers’ original loan agreements and either charge them more to continue borrowing by “restructuring” the deal with higher interest rate and fees, or charge them exit fees if the loans were not renewed.
• To do that, the bank had to demonstrate that customers had breached a “covenant” in their loan contracts. Internal guidance to managers explained that this would “enable the bank to break the ‘agreement’ with the customer” and “either call for repayment or renegotiate the terms” of the loan. Helpfully, tumbling property prices across the country offered a neat solution: A vast proportion of RBS’s business loans were secured against real estate, and most agreements contained a “loan-to-value” covenant stipulating that the customer’s borrowing must not exceed 70-80% of the value of their assets. The dire economic outlook made it easy to argue that a fall in the value of properties put customers in breach of their loan-to-value (LTV) covenants, and that meant the bank got to break the deal.
  So, after the meeting, Davies forwarded managers a “target list” of loans secured against property assets and asked staff to scour it for businesses they could force into new, costlier contracts. “I’d like you to think of customers where; They have breached covenant [or] Could breach covenant (if revalued now),” he wrote, exhorting them think of “our bonuses” and “our pride in delivering” as they sought reasons to void their customers’ loans. Davies, who did not respond to a request for comment, asked staff to keep a log of their work in a spreadsheet he had waggishly titled the Blue Peter Cash Appeal, and signed the email “Rhyds”.
  The problem for the bank’s customers was that property valuations are, as its executives later admitted in their evidence to parliament, “an art as well as a science”, and RBS often evaluated properties in a way that dispensed with any independent checks and balances.
  In order to claim a business needed to have its loan “restructured”, RBS managers needed only perform an internal “desktop” valuation – effectively just estimating how much its properties might be worth. RBS’s auditors raised concerns that the “valuation of properties might be manipulated as valuation is performed internally”. What’s more, during the crisis, managers tended to assess the value of customers’ properties on the basis of how much they would fetch not in an ordinary sale but in a fire sale, with a short marketing window. That tactic alone could massively depress the estimated purchase price. Armed with these advantages, it was not difficult to find customers who “could breach covenant (if revalued now)”.
  “There were a lot of conditions the bank would use to invoke failings or get a revaluation done,” one former RBS insider told BuzzFeed News and the BBC on condition of anonymity. “That’s what the bank invoked when it all went horribly wrong in 2008 to get everything restructured. You say it was £230,000 two years ago, it’s now £180,000, you’re under water now.” That, he said, was “where they hit you up”. RBS said that if a customer disputed the bank’s internal valuation, there would “ordinarily” be nothing to stop them getting the property surveyed independently. However, one email in the files reveals the bank’s auditors had flagged a further concern: Managers could “over-ride or ignore third party information (such as third party valuations)”.

marketing de luxe

Le luxe, ses spécificités et son marketing adapté

Le luxe est un marché qui attire et qui fonctionne grâce à des produits singuliers vendus chers. Plus le produit est coûteux, plus il va susciter de l’intérêt, comme Supdemod l’enseigne dans son Bachelor Marketing de la Mode et du Luxe. L’engouement qu’il provoque engendre alors une demande à la hauteur du succès du produit. Ce déroulement est le même que ce soit pour des produits de luxe de Haute Couture, de joaillerie ou pour les vins par exemple. 

Pour toutes les campagnes de marketing de luxe, il faut d’abord bien déterminer si son produit fait partie du marché du luxe. On peut attribuer 4 caractéristiques à un produit pour pouvoir le qualifier de luxueux. En effet, il doit :

• Avoir une excellente qualité
• Valoir cher, c’est-à-dire être vendu à un prix perçu comme très élevé
• Être rare dans l’offre et la demande
• Se caractériser par le fait qu’il est accessoire et non un produit purement fonctionnel

Pour l’ensemble de ces types de produits, on retrouve un marché du luxe à échelle mondiale. Les produits sont des œuvres d’art créées par des personnes reconnues dans leur domaine. Ainsi, la force des produits de luxe réside en leur prix, leur rareté et leur popularité. 

Le marketing du luxe : quelles stratégies

Le marketing du luxe s’appuie sur les bases du marketing. On retrouve dedans des points classiques comme la communication, le management, l’économie, le commerce, etc. Cependant, pour le luxe, il ne faut pas prendre en compte toutes les théories classiques sur :

• La fixation du prix
• Le positionnement des produits
• Le ciblage comportemental 

En effet, le fonctionnement du marché du luxe n’est pas le même que le marché classique. Une marque du luxe favorise l’image que dégage son produit sur sa rareté. Son but ? Créer le besoin pour faire rêver l’acheteur. On retrouve dans le marketing de luxe 2 stratégies différentes :

•  le marketing intuitif pour un luxe inaccessible avec une politique de prix élevé, une politique de  distribution réduite et sélective et enfin une communication simple dont le produit est à l‘origine
• le marketing élaboré pour un luxe accessible avec une politique de prix où le rapport qualité-prix est mis en avant, une politique de distribution qui implique les centres ville des grandes villes comme points de vente

Pour pouvoir s’épanouir dans le marketing de luxe, il est préférable d’être passionné par le domaine du luxe et de connaître tout ce qui a  trait à cet univers. De plus, une bonne culture générale et la curiosité sont deux qualités qui, sans la passion, ne pourront pas être bien employées.

The 24 anti-laws of marketing

The 24 anti-laws of marketing

1. Forget about positioning; luxury is not comparative. 
2. Does your product have enough flaws to give it soul? 
3. Don’t pander to your customers’ wishes. 
4. Keep non-enthusiasts out. 
5. Don’t respond to rising demand. 
6. Dominate the client. 
7. Make it difficult for clients to buy. 
8. Protect clients from non-clients, the big from the small. 
9. The role of advertising is not to sell. 
10. Communicate to those whom you are not targeting. 
11. The presumed price should always seem higher than the actual price. 
12. Luxury sets the price; price does not set luxury. 
13. Raise your prices as time goes on, in order to increase demand. 
14. Keep raising the average price of the product range. 
15. Do not sell. 
16. Keep stars out of your advertising. 
17. Cultivate closeness to the arts for initiate. 
18. Do not relocate your factories. 
19. Do not hire consultants. 
20. Do not test. 
21. Do not look for consensus. 
22. Do not look after group synergies. 
23. Do not look for cost reduction. 
24. Do not sell openly on the Internet.

Marketing To A High-End Consumer, Using The Luxury Strategy

40 years ago, a group of European luxury brands, famous but small at the time, decided to use the opportunity of globalization to grow significantly beyond the small circle of their happy-but-few historical customers. To do so, they needed to implement a marketing strategy, but they quickly discovered that while the usual marketing strategies would help them grow, they would also put them out of the luxury bracket. So, they decided to implement a totally new business strategy, which lies behind the nonstop success of those brands. All this is detailed in The Luxury Strategy, the book that I co-authored with Jean-Noël Kapferer, based on my own experience with Louis Vuitton- one of the leaders of this strategic move. For this article, I will focus on the marketing aspect of this strategy, and, more precisely, on what we named “the anti-laws of marketing.” In fact, we coined the term anti-law of marketing to designate the counterintuitive managerial principles, which made these brands command their incredible pricing power and margins.

Reaching your client

The first step is to understand that in the so-called luxury market, there are three possible strategies, which I named in my book as luxury, fashion and premium. The difference between these three strategies is huge. It does not change much in the eyes of most basic consumers, at least in the short-term. But when one has to manage a brand, the difference is pivotal. In fact, if you decide to implement a fashion or a premium strategy, the classical marketing styles works pretty well. But if you decide to implement a luxury strategy, you need to reconsider all the aspects of your marketing management.

A. The luxury strategy aims at creating the highest brand value and pricing power by leveraging all intangible elements of singularity- i.e. time, heritage, country of origin, craftsmanship, man-made, small series, prestigious clients, etc.

B. The fashion strategy is a totally different business model: here, heritage, time, are not important; fashion sells by being fashionable, which is to say, a very perishable value.

C. The premium strategy can be summarized as “pay more, get more.” Here the goal is to prove -through comparisons and benchmarking- that this is the best value within its category. Quality/price ratio is the motto. This strategy is, by essence, comparative.

The luxury strategy was originally developed for the broadly defined luxury market, and it is there that you can find it the most today as well– in fact, it’s the most efficient strategy in this market. It is seldom met on other markets, even though it can be very successful there, as brands like Apple and Nespresso have demonstrated. There are 24 anti-laws (see the full list below); thereafter, I analyze four that require an in-depth treatment.