RBS staff under investigation from German authorities over Swiss tax evasion
Disclosure in bank’s annual results about Coutts comes as it reports seventh consecutive loss
Royal Bank of Scotland was dragged into the Swiss tax evasion scandal on Thursday when it emerged that the taxpayer-owned company’s private bank is under investigation for helping wealthy clients evade tax.
The small print of the bank’s annual results revealed that “a prosecuting authority in Germany” was investigating current and former staff of the Swiss operations of Coutts, the private bank that counts the Queen among its customers.
It came as RBS, 80pc owned by the taxpayer, reported its seventh-consecutive annual loss and said it would dramatically shrink the investment bank that was built up under former Fred Goodwin, leading to thousands of job losses.
The investigation, understood to be from public prosecutors based in Dusseldorf, was disclosed for the first time on Thursday, following a political storm surrounding HSBC’s private bank in Switzerland. HSBC has been hit with allegations that its private bank helped clients with billions in assets shield them from the taxman.
Ross McEwan, RBS’s chief executive, said he did not want to prejudge the investigation, but admitted that private banks had been sloppy on conduct.
“Generally private banks have taken far too long to catch up with public expectations and here you’re seeing a situation of that same thing,” he said, adding that the bank would “come down incredibly hard on these issues”.
On page 120 of RBS’s annual results, the bank disclosed that “a prosecuting authority in Germany is undertaking an investigation into Coutts & Co Ltd in Switzerland, and current and former employees, for alleged aiding and abetting of tax evasion by certain Coutts & Co Ltd clients”.
Coutts’ Swiss arm has been co-operating with US authorities for years on a programme to recover tax payments, but Thursday’s disclosure was RBS’s first mention of the German investigation.
The investigation could cloud RBS’s sale of Coutts International, which it is in the final stages of selling. Mr McEwan, who is shrinking the bank to focus on the UK, said the decision to sell the bank had nothing to do with the investigation, but said that “[these issues] show the risks of operating away from home”.
He acknowledged that the bank may have to agree an indemnity as part of the sale, meaning that RBS could foot the bill for any fine to ensure a clean disposal.
The revelations understate how RBS, bailed out in 2008 for £45bn, is struggling to wash its hands of its inglorious history. The bank expects to reach a settlement with the US Department of Justice this year, it said.
RBS’s cumulative losses since 2008 have now reached almost £50bn after a writedown on its stake in US bank Citizens and continuing misconduct charges at the end of last year dragged it into a £3.5bn loss for 2014.
Everything Ross McEwan said about the Swiss investigation at RBS’s press conference
What is the situation?
Coutts is currently cooperating with the US and German tax authorities on these issues, we want to be upfront. I wouldn’t be prejudging the outcomes. If we find anything that has evidence of wrongdoing we will come down incredibly hard on any of those issues its just not the type of behaviour we want to have at this organisation. We have disclosed them, those are conversations that are going on its too early to judge. The US one was in the accounts last year.
How serious is the investigation?
Like I said it’s a bit too early to pre-judge. The case has been recently brought to us we’re still working with the authorities on that. Any situation like this we do see as serious, whether its big or small it is, it’s the reputation of our business and how we’ve acted, we do take seriously, we’ve showed that this year with how we dealt with a number of issues whether old or new we’ve been very open. This is what’s tarnished the banking industry and generally my view is that private banks have taken far too long to catch up with public expectations and here you’re seeing a situation of that same thing.
How will it affect the sale?
We’re in the final throes of the negoatiation of the sale, I think you’ll see it in the next couple of months, announcements regarding a sale. There has been good interest in the business there still remains good interest in the business. The issue for us in when you look at the returns we get out of our international operations of Coutts, when you look at our accounts we didn’t make any money. I’ve got to work out where I invest the capital of this organisation to get the returns and also its connectivity with the UK which is a big part of our strategy and the risk we take. Yo’ure seeing there are some parts of the business that have higher risks to others and we’re not going to get returns. The decision we made to sell Coutts International did not have anything to do with [the investigation] but they do show the risks of operating away from home.
Will you have to indemnify the business?
That’ll be part of the negotiations.
