RBS says did not mislead investors in $6.5 billion lawsuit defense

Fri Dec 13, 2013 6:00pm EST
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By Steve Slater

LONDON (Reuters) - Royal Bank of Scotland (RBS.L: Quote) said it and its former bosses might have made bad business decisions in the past but that did not mean they misled investors or acted illegally, as the bank defended itself against a 4 billion pound (US$6.5 billion) lawsuit from shareholders.

RBS's defense document, lodged in London's High Court late on Friday, said "it was clear to the market" that the bank's core Tier 1 capital ratio -- a key measure of financial strength -- was "significantly below 4 percent" at the time of a rights issue in 2008, even though it did not publish a figure.

RBS said the rights issue prospectus gave an accurate picture of its capital position and made clear the fundraising was part of a plan to rebuild its capital ratios.

RBS also rejected the allegation that it was forced into the 12 billion pound rights issue by Britain's financial regulator. The bank's directors at the time voluntarily launched the cash call that is at the heart of the lawsuit, according to a copy of the defense document seen by Reuters.

The Royal Bank of Scotland Shareholder Action Group is suing the bank and four former directors on behalf of about 100 institutions and 10,000 private shareholders, alleging they were misled over the bank's financial strength in a rights issue prospectus published months before RBS almost collapsed.

Fred Goodwin, the disgraced former chief executive of RBS who was ousted at the time of the government bailout, is among the directors accused.

"Had shareholders been given the true picture of the bank's position, they would have had a better opportunity to assess the risks which caused the shares to collapse and led to billions of pounds of losses for private and institutional shareholders alike," the action group said in a statement on Friday.

RBS is 82 percent owned by the UK government after a 45 billion pound taxpayer bailout in October 2008, after the rights issue which was announced the previous April.   Continued...

A logo of the Royal Bank of Scotland (RBS) is reflected in the window of a branch office in London November 1, 2013. REUTERS/Luke MacGregor