
RBS cuts 30,000 jobs; trims business; faces class-action suits
Losses and Lawsuits
NEW YORK - Royal Bank of Scotland (RBS) is expected to announce cuts of up to 30,000 jobs - 10% of the bank's global workforce - after sustaining a record £28 billion in losses for 2008. The 68% government-owned bank will withdraw from around 30 of its current 60 operating countries, including Malaysia and eastern Europe. In January the bank announced the sale of its 4.3% stake in Bank of China. It followed this by announcing 2,300 job cuts and an attempt to sell its remaining Asia-Pacific holdings. It is now understood that the job cuts will far exceed initial expectations due to a £1 billion restructuring of operations. Chief executive Stephen Hester is to create a subsidiary to offload £300 billion of unwanted assets - mostly in US lending, and Asian and Australian investments - to better value the company's core business.
RBS faces two class actions in the US. The most recent lawsuit is for $200 million and emerged on February 17 after the bank admitted hackers had breached its security systems in November 2008, withdrawing $9 million from 100 automatic teller machines in 49 cities within half an hour. RBS Worldpay, the bank's payment processing arm, said the social security numbers of 1.1 million Americans could have been accessed by the breach. RBS has taken responsibility for the losses incurred by the scam and says it will fight the suit on the grounds that none of its customers incurred losses.
The bank was already facing a class action from January 27 accusing it and its directors of misleading investors regarding its shares during the credit crisis. The suit claims the bank announced the sale of up to $10 billion in American depository shares (ADS) in June 2007 but failed to disclose the damage suffered by debt securities on its balance sheet. The filing also alleges RBS failed to disclose internal control failures, and the true cost of its acquisition of Dutch bank ABN Amro and resulting capitalisation issues. Shares in RBS rallied towards the end of February as a result of the bank's restructuring plan.
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