The Edinburgh-based bank’s former chief executive Fred Goodwin pushed through the purchase of Amsterdam-based ABN Amro with Spanish partner Banco Santander and Dutch-Belgian financial services group Fortis just after the global credit markets began to freeze up in 2007. For both Royal Bank and Fortis, the results were disastrous.
Royal Bank, which had to be part-nationalised after its near collapse that followed the acquisition, had already signalled in its first-half results earlier this month that there would an investigation by the Financial Services Authority into the purchase.
Six months after the acquisition in October 2007, the beleaguered lender launched a £12bn rights issue to cope with the crisis caused by the acquisition, but it was not enough to fill the gap and the bank had to be rescued.
Royal Bank said in a footnote in its half-year result that the FSA had launched a “supervisory review” into the bank in April.
Some observers have speculated that the investigation could result in further court action on behalf of shareholders.
Asked about the expected outcome of the investigation, a spokesman for Royal Bank said: “We’re not briefing at all on this, except to repeat what we said in the first-half results.”
On August 7, Royal Bank stated: “In April 2009, the FSA notified the group that it was commencing a supervisory review of the acquisition of ABN Amro in 2007 and the 2008 capital raising.”
It added: “The group and its subsidiaries are co-operating fully with this review.”
The Royal Bank-led consortium bought ABN Amro for around €70bn as part of the world’s biggest banking takeover – just as the bottom began to fall out of the US sub-prime mortgage market and capital markets plunged into deep freeze.
The deal is widely regarded to be at the root of Royal Bank’s woes, which have also resulted the loss of thousands of jobs. The debacle also led to the departure of Goodwin and the ensuing outcry over his pension pot after the £20bn tax-payer bailout. The government now owns 70% of the bank.
Meanwhile, consortium partner Fortis has already been broken up and largely nationalised.
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