walton v rbos

[paulwlton]

Especially when accounts have TWO Book Debts they both become assets. One accurate ...the other inflated

 

sparkie

 

RBS have previously stated that my accounts were set up as a "different type" of recovery account and then further stated that "recovery accounts" in general are some times set up with an interest rate that differs from the customers original contractual rate. Sez it all dun it.

[Stornoway]

In our case the "book debt" (Router Account) currently stands at £115,000 & growing, the CCJ/charging order is £39,600.

What we are missing here is the overall purpose of "internal router accounts".

 

Only visible to senior members of RBS. When times are good, & profits high, they will be declared as a debt, thus reducing their tax liability for that year. But isn't it fair to assume, that when times are tough, & the bank needs a bit more cash, they are declared as an asset.

 

Absolutely brilliant, you have to admire their creative accounting! Only one problem, IS IT LEGAL ?

The logic is a bit skew whiff here.... if the interest rate being charged is very high then the router accounts will increase in size and RBS have ;

1. more profits because the rolled up interest income will be posted to p&l

2. a larger balance sheet (more assets) because the customer loan will have increased by the amount of the rolled up interest

3. they also have a higher tax bill because they have to pay tax on their profits (i.e. tax on the rolled up interest)

 

Therefore in bad times RBS could i suppose use the routers to manipulate profits to make it look like they are making more profits than they actually are. Conversely in good times they could write off the accounts but this would have the opposite impact to the above, ie. lower profits, smaller balance sheet, lower tax bill but all they are doing is writing off something that went through the previous years accounts - they are no better or worse off overall.

 

I dont see how it really gives them much of an advantage its all swings and roundabouts. It all seems really fishy....

[DandD]

The logic is a bit skew whiff here.... if the interest rate being charged is very high then the router accounts will increase in size and RBS have ;

1. more profits because the rolled up interest income will be posted to p&l

2. a larger balance sheet (more assets) because the customer loan will have increased by the amount of the rolled up interest

3. they also have a higher tax bill because they have to pay tax on their profits (i.e. tax on the rolled up interest)

 

Therefore in bad times RBS could i suppose use the routers to manipulate profits to make it look like they are making more profits than they actually are. Conversely in good times they could write off the accounts but this would have the opposite impact to the above, ie. lower profits, smaller balance sheet, lower tax bill but all they are doing is writing off something that went through the previous years accounts - they are no better or worse off overall.

 

I dont see how it really gives them much of an advantage its all swings and roundabouts. It all seems really fishy....

 

 

So

 

Manupulating your accounts is OK???

 

I don't think you quite understand about the advantage of this practice.

 

D

[Dipply75]

RBS have previously stated that my accounts were set up as a "different type" of recovery account and then further stated that "recovery accounts" in general are some times set up with an interest rate that differs from the customers original contractual rate. Sez it all dun it.

 

"just cause" would be their answer to that then?

 

I know one of the issues the MP's questioned was, if this is an internal thing only...why the need to add signature, T&C's etc

 

Did RBS sign these also, as in a normal agreement and was it a stamp or someones signature...and who's?

[gezwee]

Hi Stornaway

 

I believe the point made is that the bank are using to their advantage by retaining live balance sheets for originating account/s return value and router.

 

Given some of the interest rates reported, at some time in their lives both combined account types could show a return value of 50k on a 10k originator. If a commercial organisation were looking to charge off a book asset the likely conclusion is that the router would be terminated. Tax recovery would be close to originating return values.......... back to square 1 with originator.

 

Don't forget, routers are allegedly for internal accounting only and would not show as markers on a CRA or be used for debt recovery......... yeah, yeah :grin:

 

Both improve book assets until the time is ripe to write or charge off whichever is the most suited to their commercial needs at any given time.

[Stornoway]

So

 

Manupulating your accounts is OK???

 

I don't think you quite understand about the advantage of this practice.

 

D

 

I dont think anyone understands the advantage of this practice .....

[gezwee]

Its gone a bit quiet, hands up who's gone scratching through their nonsensical responses from the bank before posting again

 

Guess this is one thats going to run and run until we get some answers via the press.

 

Debs............ are you the RBS Scottish customer reported in the ap a while back??

[Stornoway]

Hi Stornaway

 

Don't forget, routers are allegedly for internal accounting only and would not show as markers on a CRA or be used for debt recovery......... yeah, yeah :grin:

 

Both improve book assets until the time is ripe to write or charge off whichever is the most suited to their commercial needs at any given time.

 

Hi Gezwee

 

I think the two points above are key;

1. they are only better off if they actually manage to recover the router balances

2. whilst they could use the routers to manipulate profits / balance sheet from 1 year to the next, this is simply massaging of their accounts and they are no better off overall unless they recover the full router balance.

 

All the banks massage their accounts to a greater or lesser degree - one high street bank I know used to sell off some of its branches at the year end if it needed to boost profits. They also have a fair amount of free hand when it comes to attributing bad debts - they have a specific bad debt figure in the accts which is actual losses and a general bad debt figure which is their estimate of how much provisions they will need going forward. That's just two examples but there are many more.

 

In the scale of the Royal Bank's balance sheet (hundreds of billions) these router accounts must be pretty small beer (but nonetheless very important to the individuals concerned) and any manipulation of their accounts would be small. I therefore get to the conclusion that they could only really be using the routers because they want to pursue borrowers for the higher balances.

[gezwee]

Hi Stornaway

 

Thanks for the input, always good to have a sounding board when deep in the mire (sorry, meant thought..lol)

 

Just a thought (yep, another one) but latest reports on percentage of defaulted accounts in the UK would show no small beer for routers, in the instance of Debs ....... I'm sure she was mentioned in an ap post from last year?..... we would be at a little more than small change even for the RBS.

 

Balance sheets for a Plc are primarily massaged to encourage investment, may be thinking out loud but why did share price drop to circa 12p earlier this year if investors were confident of reported return values.

 

Oh and we've hijacked Pauls thread so apologies are due me thinks

[Stornoway]

Hi

 

Just a thought (yep, another one) but latest reports on percentage of defaulted accounts in the UK would show no small beer for routers, in the instance of Debs ....... I'm sure she was mentioned in an ap post from last year?..... we would be at a little more than small change even for the RBS.

 

True Gezwee but remeber that the routers appear to have been around for a fair old while - long before the credit crunch and the collapse of the RBS share price.

 

I'm off to bed now.

 

Cheers

[bedlington83]

1. they are only better off if they actually manage to recover the router balances

2. whilst they could use the routers to manipulate profits / balance sheet from 1 year to the next, this is simply massaging of their accounts and they are no better off overall unless they recover the full router balance.

They are better off regardless of what they do. Either they pursue the "debtor" for the balance or they write the debt off and get tax relief on it. In both cases they have more money than they are entitled to

[the_shadow]

Latest explanation is that the router accounting system is an internal mechanism that's used to aggregate customers accounts. The book debt is an assett.

 

apologies for my ignorance but I thought all debt was now to be held as liabilities not assets for accounting purposes? Wasnt this part of one of the recent accountancy reporting laws... basel II?

 

S.

[bedlington83]

That can't be right otherwise securitisation wouldn't be possible

[the_shadow]

apologies for my ignorance but I thought all debt was now to be held as liabilities not assets for accounting purposes? Wasnt this part of one of the recent accountancy reporting laws... basel II?

 

S.

 

thinking about it I must be getting confused, I think BaselII only applies to the reporting of credit worthiness of banks not actual balance sheet recording of debt/liabilities.

 

S.

[paulwlton]

Hello Paul,

Any ideas which papers please

 

The Guardian.

 

Paul

[Stornoway]

apologies for my ignorance but I thought all debt was now to be held as liabilities not assets for accounting purposes? Wasnt this part of one of the recent accountancy reporting laws... basel II?

 

S.

 

Any debt you have with RBS is a liabilility for you but its on the banks balance sheet as an asset. A deposit a/c you have with RBS is a liability on their balance sheet because they owe you the money.

[Stornoway]

They are better off regardless of what they do. Either they pursue the "debtor" for the balance or they write the debt off and get tax relief on it. In both cases they have more money than they are entitled to

 

That's not actually correct. If they pursue the debtor they are better off.

 

But if they write off the router then yes they will get tax relief but they will have paid more tax the previous year on the inflated interest they are charging so they are no better off overall. Unless of course the purpose is to manipulate profits from one year to the next but I think there must be easier ways for the banks to do so.

 

I still think the plan must have been to pursue the higher amounts in the router accts.

[Stornoway]

thinking about it I must be getting confused, I think BaselII only applies to the reporting of credit worthiness of banks not actual balance sheet recording of debt/liabilities.

 

S.

Basle 2 was supposed to be about capital adequacy - ie. to ensure that banks were holding the right amount of capital for the type of lending they were doing.

[paulwlton]

Makes sense....from an earlier post.

 

 

 

 

 

Thinking back to when I worked in the banks as a Financial Adviser in the early 90's, this 'moving' of debt accounts went on all the time. Although I wasn't involved in day to day banking, I did keep my ear to the ground as to what things went on.

 

I clearly remember a case of a high overdraft on one account, where the account holder was not repaying anything or was not in a position to repay it.

 

The branches were put under pressure to keep dormant overdrafts to a minimum. Branch managers were targetted on their 'net balances' of the branch . A large dormant overdraft would have an effect on the net balance of the branch and would leave the manager open to some awkwad questioning from head office.

 

At the same time, they were targetted on sales of personal loans.

 

So what do you think happened to large dormant overdrafts???

 

It was a case of branch managers killing two birds with the one stone. Net balances increased due to the 'removal' of the overdraft and the lending book increased towards their sales target.

 

All this was done as a 'paper exercise' without the knowledge of the debtor, and no consideration given to the CCA or any repercussions. If the fantasy loan wasn't repaid, then the banks went for judgement, and the poor debtor in those days who didn't know their rights were screwed.

 

The reverse also happened, there were instances where current accounts were opened and put into overdraft, and unauthorised overdrafts were increased if the branch had a good net balance figure - to cover the fact that a loan granted had not been repaid, as the manager would also be questioned about loans with 2 or more consecutive missed repayments. This would make it look like a PL granted by the manager, was continuing to be repaid every month and would not show up on any reports. The overdraft would not be questioned for some time if the branch had a good net balance figure. Again these new accounts were set up without the knowledge of the debtor. I suppose money laundering regulations have made this more difficult now? Or maybe not?

[JonCris]

apologies for my ignorance but I thought all debt was now to be held as liabilities not assets for accounting purposes? Wasnt this part of one of the recent accountancy reporting laws... basel II?

 

S.

 

But 'loans' to customers are not debt that's why they are 'loans' albeit fictitious ones they are assets hence lots of loans mean big bonuses

[rickyd]

there is a recent and very high profile case involving RBS in Edinburgh where the creator of the phantom loans was paid huge bonuses and received pay rises on the strength of his sales figures. He was also taken to the banks conferences each year as a reward and genrally made out to be a hero but when the external auditor discovered the truth he went to jail for 10 years and his immediate superior was fined and sacked and his boss got a massive fine.

 

Creating phantom loans is the quickest way out of a job I can think of and on;y a fool would consider it, no matter what pressure was coming from head office.

 

The other thing to consider is that banks make far more from overdraft interest than they do from loans so income drops each time an o/draft is repaid by a loan.

[bedlington83]

there is a recent and very high profile case involving RBS in Edinburgh where the creator of the phantom loans was paid huge bonuses and received pay rises on the strength of his sales figures. He was also taken to the banks conferences each year as a reward and genrally made out to be a hero but when the external auditor discovered the truth he went to jail for 10 years and his immediate superior was fined and sacked and his boss got a massive fine.

So RBS have form for this kind of thing!? That puts a whole new slant on things. Any chance of a link or reference?

[bedlington83]

Was Paul one of this fraudsters victims? And while we're at it, what efforts has RBS made to find and recompense any of the victims? The more I learn the more it becomes obvious that RBS needs it's accounts auditing by the FSA, not that that'll happen

[bedlington83]

But if they write off the router then yes they will get tax relief but they will have paid more tax the previous year on the inflated interest they are charging

No. You pay tax on profits. As the inflated interest is an amount owed it can be treated as an asset (and resold) but it isn't income until its paid so it can't be profit and no tax is due.

[Debtcontrol]

Makes sense....from an earlier post.

 

 

 

 

 

Thinking back to when I worked in the banks as a Financial Adviser in the early 90's, this 'moving' of debt accounts went on all the time. Although I wasn't involved in day to day banking, I did keep my ear to the ground as to what things went on.

 

I clearly remember a case of a high overdraft on one account, where the account holder was not repaying anything or was not in a position to repay it.

 

The branches were put under pressure to keep dormant overdrafts to a minimum. Branch managers were targetted on their 'net balances' of the branch . A large dormant overdraft would have an effect on the net balance of the branch and would leave the manager open to some awkwad questioning from head office.

 

At the same time, they were targetted on sales of personal loans.

 

So what do you think happened to large dormant overdrafts???

 

It was a case of branch managers killing two birds with the one stone. Net balances increased due to the 'removal' of the overdraft and the lending book increased towards their sales target.

 

All this was done as a 'paper exercise' without the knowledge of the debtor, and no consideration given to the CCA or any repercussions. If the fantasy loan wasn't repaid, then the banks went for judgement, and the poor debtor in those days who didn't know their rights were screwed.

 

The reverse also happened, there were instances where current accounts were opened and put into overdraft, and unauthorised overdrafts were increased if the branch had a good net balance figure - to cover the fact that a loan granted had not been repaid, as the manager would also be questioned about loans with 2 or more consecutive missed repayments. This would make it look like a PL granted by the manager, was continuing to be repaid every month and would not show up on any reports. The overdraft would not be questioned for some time if the branch had a good net balance figure. Again these new accounts were set up without the knowledge of the debtor. I suppose money laundering regulations have made this more difficult now? Or maybe not?

 

Hello,

 

Sorry to hijack this thread, but what you have just described has happened to me. They have either taken an overdraft or CC debt (I really cant remember - it was in 2003, have SAR them though) and put it into a loan account without my consent or knowledge.

My thread is here -

http://www.consumeractiongroup.co.uk/forum/debt-collection-industry/205940-debtcontrol-rbs-cc-capquest.html

 

What can I do - I am now being chased by Capquest for a debt I honestly knew nothing about.