Ulster bank/Collateral Damage Spotlight


Ulster bank/Collateral Damage

Hard-hitting investigations. Jennifer O'Leary investigates claims that a leading bank forced businesses into insolvency.


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Ulster Bank - bailed out by taxpayers,

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now accused of pushing some businesses into bankruptcy

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to boost the bank's balance sheet.

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If the Ulster Bank had been prepared to work with the business,

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those jobs could have been saved.

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It was as if we had been attacked in our sleep.

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A Government-commissioned report also claims the bank pushed

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viable businesses to the wall for its own profit.

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It's ingrained in us to trust the bank and, I think,

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that's where people have gone wrong.

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An insider claims that a division of the RBS Group, Ulster Bank's parent company,

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targeted some businesses that could have survived.

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I was directed to destroy viable businesses by the bank.

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That was my job. I was told to do so.

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Ulster Bank denied the allegations,

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but questions persist about how the bank treated some business customers.

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The fall-out from Northern Ireland's toxic debt crisis.

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This is the company's offices here.

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Downpatrick-based building company Polly Bros Ltd

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went into administration in late 2009.

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The construction company was started by my father in 1957.

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I took over the business in the mid-'80s

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and grew the business from there.

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And, at one stage, it employed about 120 people.

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What was your business ethos in terms of Polly Brothers?

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My bankers, the Ulster Bank, always said I was a conservative customer.

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If I wanted to buy a piece of land, I had the money to buy it,

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I didn't need to go near the bank.

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During the boom years,

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according to Brian Polly, Ulster Bank was keen to lend to him.

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The bank were very happy to lend me large sums of money,

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but I was very apprehensive.

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There were two sets in particular that the bank wanted me to buy.

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They rang me up and asked me, "Come in on Monday morning, the deeds are here,

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"and the money is here for you."

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I said, "Boys, I'm not interested in buying that.

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"I'm not interested. I have enough."

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Brian Polly did, however, borrow from the bank.

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I bought a site in a prime location in Belfast.

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They lent me the money and then they got it revalued again after I bought it

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and they said there was plenty of equity in it, let's go again.

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In 2006,

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Brian Polly's company had loans of £6 million from Ulster Bank.

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Ulster Bank has for decades been among Northern Ireland's leading business banks.

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In 2000, it became part of the Royal Bank of Scotland, RBS.

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In the boom years, the bank, like others, went on a lending binge.

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In 2007, Ulster Bank had a loan book across the island of £55 billion.

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Ulster Bank was infected by the same culture as RBS,

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which was that RBS basically kept on betting on future growth in the economy.

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And Ulster Bank, in the same way, bet on an assumption

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that you would have constant growth in property prices, both north and south.

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It was a huge bet brought down in part by a global financial crisis.

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This is a once-in-a-half-century,

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probably once-in-a-century type of event.

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They can't close the markets like that!

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By 2008, collapse of the investment bank Lehman Brothers

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triggered global financial turmoil.

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Weeks into the crisis, RBS, Ulster Bank's parent company,

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came within hours of running out of money.

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The end of an era for British banking.

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Some of the biggest names go cap in hand to the Government.

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A £37 billion Government bailout

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saved Ulster Bank's parent company, RBS,

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along with HBOS and Lloyds TSB, from collapse.

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The move made Ulster Bank 81% taxpayer owned.

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For Brian Polly, it seemed, at first, nothing much had changed.

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They were ringing me up, trying to get me to come to the Christmas party

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after being bailed out by the UK taxpayer.

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I point blankly refused to go. It wasn't what I stood for.

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You cannot be bailed out by people on the street and then it's party time. No.

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But the party was over.

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Property values began to slide.

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Ulster Bank was, like most UK banks,

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extremely exposed to the property market.

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And when the property market fell and fell dramatically,

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it had a lot of loans which were bad, in essence.

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A bad loan is when the value of the firm, or the company that has borrowed,

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is actually less than the value of the loan.

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Property prices fell by about 50%.

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That meant that anyone who borrowed money with conditions attached to it,

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in terms of the loan being immediately repayable

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once the property prices fell, that meant they were stuffed, basically.

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The small print was about to become a big deal.

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Once the value of the underlying property, the securing the loan,

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falls below a certain value, then the banks essentially can do what they want.

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They own that business, in essence.

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And so they essentially can transfer money between different accounts.

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They essentially can put very strict conditions on what the actual business can do.

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With so much bad debt on its books,

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Ulster Bank was under pressure to get as much of its money back as possible.

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It started by slimming down its loan book.

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The practice of removing a bad debt from a bank's books is not unusual

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and Ulster Bank has a division to deal with loans

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that are going bad, or seen as risky.

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It is called GRG - the Global Restructuring Group.

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In January 2009, Brian Polly was introduced to Ulster Bank's GRG division.

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The executive out of the Ulster Bank, he said, "We are just putting you

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"into GR...it's only a short-term arrangement.

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"We think the business is just a wee bit sick.

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"It's like a wee bit of special care and you'll come out again in a month, two months' time."

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GRG is supposed to get businesses back in shape

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and, at the same time, protect the bank's position by minimising further losses.

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But Brian Polly claims pressures imposed by GRG

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tipped his company into insolvency.

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There was an arrangement there that every time there was a house completed,

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the bank got such a percentage per house

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and that the remaining moneys would be left in the account to further progress the work in progress.

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But the bank just started taking all the money.

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There was a considerable sum of money that came in one Friday evening of almost £400,000.

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I checked the internet banking on the Friday evening, the money was there.

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I went into my office as usual at 6.30 on the Monday morning, everything was there.

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Before I left, whenever I went in to make sure the money was there,

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the money was gone. 400. Almost 400K was taken out of the account.

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I was absolutely flabbergasted.

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Flabbergasted. Could not...

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The stress of that there is absolutely unbelievable.

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It meant that it sort of very much tipped the business towards the edge.

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Obviously, the creditors - that was the creditors' money, the suppliers,

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people who had done work on that particular contract.

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It took the thing into a negative state.

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By the end of nine months in GRG,

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Brian Polly's company was no longer in a position to pay its bills.

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Ulster Bank told Spotlight that, following multiple petitions by creditors,

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the company was placed into administration.

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I put proposals to the bank on a work-out situation.

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I had employed professional people to help me do that.

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Er, the bank just wasn't prepared to listen.

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Brian Polly is convinced that he had a worthwhile business.

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This here was another design-and-build scheme.

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We built, I think, 270 houses there.

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But that didn't matter to anyone. It didn't matter.

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There were 45 people directly employed. They lost their jobs.

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If the Ulster Bank had been prepared to work with the business,

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those jobs could have been saved.

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Because I had a number of design-and-build schemes lined up.

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Brian Polly wanted to trade his way out of trouble,

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but, in the wake of its bailout, the bank had a mandate

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to rebalance its books and address so-called bad loans -

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liabilities that were now underwritten by taxpayers.

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What effect has the loss of your business had on you?

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It is like letting off a hand grenade in the middle of you. You are completely devastated.

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I sometimes think, "Was it all my fault?"

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How come I've ended up here after working so hard?

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Another casualty of the downturn was Michael Taggart,

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whose firm Taggart Holdings collapsed in 2008.

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He also alleges that the actions of Ulster Bank

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contributed to the failure of his construction and property development company.

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In June 2007, Ulster Bank refused to pay cheques made out by the company.

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The cheques were stopped out of the blue. There was no warning.

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There were no e-mails, there wasn't anything.

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It was as if we had been attacked in our sleep.

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The bank claims that a Taggart company had breached

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the terms of a loan agreement, but Michael Taggart disputes this.

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Our business was sitting with in excess of 20 million on deposit.

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We had about £650 million of assets.

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We had £250 million of borrowing.

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The Ulster Bank had less than 10% of that borrowing.

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Michael Taggart alleges that Ulster Bank's actions immediately damaged his company's credibility.

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Months later, the value of his company's assets decreased rapidly

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when the property market crashed.

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You understand that when you took those loans from the bank,

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that there was a small print that they could call in those loans?

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I wish they had called in the loans in June '07, because, if they had,

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we could have paid them. That is what I wanted to do.

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But they led us to believe we don't need to do that.

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That was the mistake I made, that I did believe them.

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Ulster Bank declined to comment because of an ongoing legal case

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between Michael, his brother John and the bank.

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It is a big task to take on a bank,

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which is why most people roll over and say, "OK, do what you want."

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I do what I believe in.

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Part of their legal case is centred on personal guarantees

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for borrowings by Taggart Holdings.

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It wasn't good enough that they destroyed the business, then they

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had to try to take us out personally and completely finish the job.

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It is nothing more than blood sport. It is just blood sport.

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Several business owners contacted Spotlight,

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alleging that Ulster Bank's GRG division pushed their business

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to the brink of bankruptcy and, in some cases, into insolvency.

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They all spoke of the enormous strain being put on them, but would not go public

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because, they said, they are scared of the bank.

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Spotlight wanted to speak to Ulster Bank's chief executive

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about the bank's treatment of business customers.

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It is Jennifer O'Leary here again, from BBC Spotlight.

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I am aware you have previously indicated there is nobody from Ulster Bank,

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including the chief executive, Jim Brown, available to interview.

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If you could get back to me, I'd be very grateful.

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We first asked Ulster Bank for an interview five weeks ago now.

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And at different times making the programme,

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we've asked the bank to consider putting a spokesperson,

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if not the chief executive, forward to speak to us.

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But they declined to do so.

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They did provide statements through their lawyers, in which they say

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treating all customers fairly is at the core of what they do.

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It's a consistent message.

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In 2010, Henry Elvin, the bank's then head of business banking

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told a Stormont committee that Ulster Bank was on the side of its business customers.

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I sat in a meeting this morning where we had ten difficult customers.

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If we wanted to be difficult,

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we would have put receivers into half those customers. We didn't.

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So the banks, and I can only speak for Ulster Bank, and the other guys can speak,

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the banks are giving these guys every chance.

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But RBS and Ulster Bank's treatment of business customers is under scrutiny.

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Sports car manufacturer Lawrence Tomlinson was a Government adviser when he was commissioned last year

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by Business Secretary Vince Cable to write a report on bank lending.

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His report made a number of damning allegations about GRG.

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It was really shocking.

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In fact, some of the first cases that came to me

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were actually from Ulster Bank.

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Businesses saying, "Not can we not get access to finance,

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"but our finances are being taken away from us and we are being distressed

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"and we are losing jobs and we are being shut down by this GRG."

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The Ulster Bank customers who spoke to Spotlight on camera

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did not make contact with Lawrence Tomlinson ahead of his report.

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In it, he accused the bank of forcing some good and viable businesses to collapse,

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so as to make more profit.

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Businesses that had a future were put into this business support unit,

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called GRG, on the pretence that they would be helped.

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There were really huge fees charged immediately.

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Their facilities were shrunken.

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They caused distressed.

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They had some kind of independent business review that cost them a lot of money.

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It seems, in these instances, that GRG has acted just to be a profit centre

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and make as much money for the bank as possible.

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The Tomlinson Report also claimed

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there were instances of businesses having their assets revalued without consultation

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and then being told they were in breach of their loan conditions,

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which triggered the bank calling in personal guarantees.

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Personal guarantees could be their family home,

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it could be agricultural land.

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Once the loan covenants are breached,

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then the bank can move against and call in the personal guarantee.

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What GRG did, allegedly, and there is a lot of evidence behind this,

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is that GRG said if it liked the assets,

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it would take over the assets through a complex process

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by putting the company into administration.

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And that is where we have the serious problems with GRG.

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That's particularly affected Northern Ireland,

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with a lot of Ulster Bank customers having their assets recovered

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through this rather painful process.

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Ulster Bank called in Brian Polly's personal guarantees in 2010.

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I had a farm here that I particularly enjoyed at the weekends, you know.

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I always loved walking over my farm at the weekend

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and they got it. The first thing I knew about my farm being up for sale

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was there was a signpost put at the end of the road and it was a shock.

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Strangers came round to look around the farm and I was absolutely devastated.

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I had invested in five houses for my kids.

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But, er, the bank got them all.

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They probably saw it as a soft company to go after, you know, and grab the assets.

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We would have liked to have interviewed the bank about these claims.

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We have, however, made contact with an RBS insider.

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He worked for a number of years in a GRG division,

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although not with Ulster Bank clients.

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I'm on my way to meet with the insider who's agreed

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to speak to Spotlight on the basis of anonymity.

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He did not deal with businesses in Northern Ireland,

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but he says he has first-hand experience of working in GRG at RBS,

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Ulster Bank's parent company.

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GRG was a global division which takes care of all subsidiary RBS banks.

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Is GRG the same in how it operates in Belfast, London, Dublin or Edinburgh?

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Yes. Every different bank within the UK,

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Northern Ireland, Ireland, it's all done exactly the same.

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Our main remit was to collect as much money as possible from clients to help the bank.

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The insider says that GRG staff intercepted payments

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being made to companies regardless of the consequences.

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We would always watch the accounts.

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It would be on our screens all the time.

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Several different clients.

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We'd see interactions between them and their customers,

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or their creditors and, often, we would siphon that money off to our account and call it a debt.

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I remember a senior manager in our team was doing a transaction like that,

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and he was working with another colleague from a few desks down,

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and he stood up and punched the air

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and said something along the lines of, "Fantastic, we have it!"

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The money had come in and it was grabbed, so to speak.

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Any cash that we can possibly get our hands on to make our position better,

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we would get our hands on it.

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Even if that cash had been set aside

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and you had been told by the businesses?

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They say, "That money is to pay revenue."

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It didn't matter. We were the bankers.

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But you were the bank that was saved by taxpayers.

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To be frank, most people don't even care about that,

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they're bankers before they're members of the UK.

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Of course, it was one of GRG's jobs to minimise losses

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for the now majority taxpayer-owned bank.

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However, the insider claims that profit took priority over small firms that had a future.

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Did you, as part of your role in GRG,

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did you deliberately push businesses into insolvency?

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Yes. I was directed to destroy viable businesses by the bank

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and that was my job. I was told to do so.

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You're appraised on how much fees you brought in every week

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and, of course, you were bought a beer by one of your managers for a job well done.

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The insider did not deal with the Ulster Bank customers who spoke to Spotlight,

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but he says there was an awareness of the stress some customers in GRG were under.

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People were crying.

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They were pleading with us to put the money back into the account, or stop taking the fees out.

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They'd ask us not to target their business,

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which is essentially what we were doing, unfortunately.

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If the business had a large number of concrete assets we'd want,

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we'd simply shove the business into an insolvency position.

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Did you deliberately target businesses that were asset-heavy?

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Yes.

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If we had those businesses and assets, say houses, properties,

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cars, or anything, we could then sell those onwards to make a profit.

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RBS and Ulster Bank have a dedicated property division.

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It's called West Register.

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The Tomlinson Report raised the concern

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that some businesses in GRG subsequently had their assets sold

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to West Register at a discounted price.

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The customers are being dealt with by GRG on one set of desks,

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and then the property ends up being owned by West Register.

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If you were a customer who goes into GRG,

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are you getting the best value for your property,

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if it's bought by the bank who is putting you in distress?

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The GRG insider claims that he worked closely

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with his colleagues in West Register, the bank's property unit.

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We sat 30ft away from them.

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We could yell out to West Register to come down and look at a case, if we wanted them to.

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You would usually pick up a case file and walk down to West Register,

0:21:420:21:46

or they could come and see you under the guise of making it more secure for the bank.

0:21:460:21:51

The chief executive of RBS, Ulster Bank's owners, admitted

0:21:520:21:57

that the reputation of the bailed-out bank had been seriously damaged

0:21:570:22:01

by the allegation that it deliberately wrecked small firms in the pursuit of profit.

0:22:010:22:07

He said there was no evidence to back up that claim.

0:22:070:22:10

But, nonetheless, the bank hired the law firm Clifford Chance

0:22:100:22:14

to investigate the claims made in the Tomlinson Report.

0:22:140:22:18

The review covered RBS in Britain and Ulster Bank in Northern Ireland.

0:22:180:22:23

The Clifford Chance report supported the bank's contention

0:22:230:22:27

that they hadn't deliberately targeted or wrecked small businesses for profit.

0:22:270:22:31

Indeed, the report went further.

0:22:320:22:35

The Clifford Chance report found there was no evidence of fraudulent activity,

0:22:350:22:40

but Lawrence Tomlinson said his report never accused the bank of fraud.

0:22:400:22:45

He said a number of the Clifford Chance findings

0:22:450:22:48

tallied with the central themes of his report.

0:22:480:22:51

For example, the lack of transparency over fees

0:22:510:22:54

and the need for an improved business culture in GRG.

0:22:540:22:57

The City of London is home to the lobby group Bully Banks.

0:23:020:23:05

Their spokesperson, Jeremy Roe, is highly critical of the Clifford Chance investigation.

0:23:050:23:11

You have a bank instruct a solicitor,

0:23:120:23:17

who it frequently instructs on other matters,

0:23:170:23:20

to carry out an investigation into its practices.

0:23:200:23:25

The report, I think, could have been written by a bank, actually.

0:23:250:23:28

It's got that sort of feel to it.

0:23:280:23:31

It doesn't appear to be an incisive investigative report.

0:23:310:23:36

Ulster Bank told Spotlight that Clifford Chance were instructed

0:23:360:23:39

to report on an independent and objective basis

0:23:390:23:43

and the review was led by a team that had no previous dealings with GRG matters.

0:23:430:23:48

But RBS and Ulster Bank's GRG division remain in the spotlight.

0:23:500:23:54

GRG's activities are still the subject of an ongoing review

0:23:560:24:00

with a financial regulator.

0:24:000:24:02

The Financial Conduct Authority, based here in London, has appointed two outside firms

0:24:020:24:08

to investigate RBS's treatment of business customers in financial difficulty.

0:24:080:24:14

The Bank of England told Spotlight that it is also working

0:24:150:24:19

with the FCA to examine the details of the report.

0:24:190:24:23

I've had over 1,000 businesses contact me.

0:24:230:24:25

I've no idea how many cases there could be,

0:24:250:24:28

but it is a really considerable number of cases that the FCA are investigating now.

0:24:280:24:34

Meanwhile, the Serious Fraud Office told Spotlight

0:24:370:24:41

that they continue to monitor developments.

0:24:410:24:43

So criminal proceedings cannot be ruled out.

0:24:430:24:47

RBS recently announced plans to sell off its controversial West Register property portfolio.

0:24:470:24:54

Explaining the move, the bank said there was a damaging perception

0:24:540:24:58

that the bank had a conflict of interest

0:24:580:25:00

when it purchased a property as part of a restructuring process.

0:25:000:25:04

Ulster Bank told us that West Register in Northern Ireland

0:25:040:25:09

holds properties that were previously owned by 14 Ulster Bank NI customers.

0:25:090:25:15

The bank said that, in many cases, the properties were marketed openly

0:25:150:25:18

and that West Register was the highest bidder.

0:25:180:25:22

But Ulster Bank declined to confirm whether or not the properties had been part of businesses

0:25:220:25:29

previously in the global restructuring group GRG.

0:25:290:25:33

Spotlight asked Ulster Bank if it was concerned

0:25:330:25:37

about any possible conflicts of interest, given that we know

0:25:370:25:41

of two bank executives who are also the directors of private property companies in Northern Ireland.

0:25:410:25:49

Ulster Bank told us, as well, that all conflicts are managed

0:25:490:25:52

in accordance with its existing code of conduct.

0:25:520:25:56

We asked the bank for a copy of that code of conduct,

0:25:560:25:59

but, instead, the bank simply referred us to previous statements

0:25:590:26:03

in which it had already made that point.

0:26:030:26:06

But Jeremy Roe says the situation is of concern.

0:26:070:26:10

Would I, as an employee of RBS, conduct myself as a director of a third-party company? No.

0:26:120:26:19

Would I allow anybody who worked for me, if I was a senior manager with RBS, to do that? No.

0:26:190:26:25

Ulster Bank told Spotlight they continue to strongly refute

0:26:250:26:30

the accusations made by Lawrence Tomlinson.

0:26:300:26:33

The bank's chief executive, Jim Brown, recently made the same point

0:26:330:26:36

to Stormont's Finance Committee.

0:26:360:26:38

Mr Tomlinson hasn't contacted me.

0:26:380:26:41

He has not written to me, nor phoned me.

0:26:410:26:44

He hasn't sent any evidence around any cases regarding Ulster Bank.

0:26:440:26:49

I think Ulster Bank's denial of anything being wrong

0:26:490:26:53

is just ostrich-like in sticking their head in the sand.

0:26:530:26:58

I'm happy to meet Jim Brown. I'm happy to discuss the cases that are specific to him.

0:26:580:27:03

Responsibility for banking is not devolved to Stormont.

0:27:030:27:07

Westminster's Northern Ireland Affairs Committee

0:27:070:27:10

is conducting an inquiry into the banking system here.

0:27:100:27:14

Remember, Ulster Bank aren't answerable to anybody here.

0:27:140:27:17

The first time Ulster Bank really had to answer questions on any of this

0:27:170:27:20

was when it came before the Select Committee.

0:27:200:27:22

It effectively got away in the breeze, able to hide under the coat tails of RBS,

0:27:220:27:26

when RBS were being investigated for the greater problems that they had created.

0:27:260:27:30

Despite their ongoing legal case,

0:27:320:27:35

the Taggart brothers have, in recent months, raised money from private investors.

0:27:350:27:40

This site is outside Limavady.

0:27:400:27:42

We are going to build out the site.

0:27:420:27:46

This is the first development since 2008 that we have been involved in.

0:27:460:27:50

How does it feel being back on sites?

0:27:500:27:53

It feels great getting back at it

0:27:530:27:55

and we have every intention of keeping going and being as successful as we ever were.

0:27:550:28:00

Four years on and Brian Polly's company is still being run

0:28:010:28:04

by administrators appointed by the bank.

0:28:040:28:08

Most companies are wounded up after six weeks.

0:28:080:28:10

Four years later, my business is still going.

0:28:100:28:14

I find that incredible.

0:28:140:28:16

Brian is dealing with the personal impact of bankruptcy.

0:28:160:28:19

It's very humiliating, you know.

0:28:190:28:22

I was an extremely proud man. I loved to pay my people on time, you know.

0:28:220:28:26

It was... If you don't have honour and integrity in business, you have nothing.

0:28:260:28:32

Despite the setbacks, Brian is determined to get back in business.

0:28:320:28:37

There is light at the end of the tunnel.

0:28:370:28:39

I look forward to the day - back in business again

0:28:390:28:45

and doing what I do best.

0:28:450:28:47

Ulster Bank recently posted its first quarterly profit in five years.

0:28:470:28:52

Its owners, RBS, have also returned to profit.

0:28:520:28:56

But the insider alleges the upturn has come at a cost to some.

0:28:560:29:01

There are many businesspeople who did not come out of the GRG process

0:29:020:29:08

and they blame themselves for what happened to their businesses.

0:29:080:29:11

The majority of them, they became, unfortunately,

0:29:110:29:15

a casualty of war in our bid to make the bank more liquid.

0:29:150:29:20

I think that if you put RBS and Ulster Bank and GRG and West Register together,

0:29:200:29:26

this represents the worst banking scandal, within the UK, of all the banking scandals.

0:29:260:29:31

Ulster Bank was bailed out by taxpayers because it was part of a group that was too big to fail.

0:29:330:29:39

Now it stands accused of failing some of its customers

0:29:390:29:42

and the question remains - was Ulster Bank's approach prudent,

0:29:420:29:47

or predatory in the pursuit of profit?

0:29:470:29:51

bank|businesses|insolvency.


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