RBS takeover of ABN Amro to be investigated
The £60 billion acquisition of ABN Amro by Royal Bank of Scotland back in 2007 is set to be investigated by the Financial Services Authority (FSA). While many people have been calling for a formal investigation of the takeover it is a surprise to see that nearly 2 years after the acquisition the FSA is set to act. So what is the basis of the investigation?
The investigation will look at whether Royal Bank of Scotland management, i.e. Sir Fred Goodwin and his fellow directors, were fully aware of the risks they were taking on and whether the £12 billion rights issue which accompanied the acquisition was ever going to be enough. There is a feeling that the £12 billion fund raising fell far short of the funding required to cover a growing toxic debt mountain as the UK economy started to slow, although further information will be revealed by the FSA investigation.
While there were very few complaints about the acquisition at the time, with the Royal Bank of Scotland on a roll and having become one of the largest banking operations in the world, with hindsight maybe this move was a step too far?
It will be interesting to see what the FSA investigation unearths and whether the final summary could form the basis of further court action on behalf of shareholders.
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