Clydesdale Bank facing costs of hundreds of millions over business loan scandal


Glasgow-based Clydesdale Bank is facing a class action law suit that could run into hundreds of millions of pounds over allegations that it mis-sold loans to small businesses (SME) without properly explaining terms that would eventually see many customers’ firms forced out of business by spiralling costs.

Claims management company RGL Management confirmed that it intends to bring a claim against Clydesdale Bank (including claims relating to conduct under its trading name Yorkshire Bank) and its previous parent company National Australia Bank (“NAB”) on behalf of businesses who purchased fixed rate Tailored Business Loans (TBLs) between 2002 and 2012.

RGL said it believes that in excess of 6,000 SMEs have legitimate grounds to join the action, claiming many SMEs that took out Tailored Business Loans (TBLs) containing interest rate swaps that were not clearly explained to customers are understood to have been sold to SMEs by Clydesdale Bank between 2001 and 2012.

RGL said it has received funding of at least £2.7m from Augusta Ventures Limited, one of the largest and most respected litigation funders in the UK, to prosecute the litigation.

Many Clydesdale TBL customers later lost their businesses to insolvency with the slashing of interest rates in the wake of the 2008 banking crisis sharply forced up the cost of the loans.

RGL said this damage to businesses was a result of the “fraudulent behaviour” of the bank.

RGL expects to issue claims this year, with precise timing dependent on tactical considerations, meaning that it could happen very quickly leaving those SMEs that have valid claims with little or no time to join, if they have not already done so.

RGL has already recruited a significant number of SME businesses to its group and encourages any business that took out a TBL to contact RGL at Given that the funding is already in place, claimants will be able to join the action without making any financial contribution to the costs and without any exposure to an adverse costs order.

James Hayward, CEO of RGL said: “Clydesdale’s conduct is actionable and we’ll be suing those involved in order to recover damages for those customers it harmed. Proceedings will probably be issued later this year, however the exact timing is difficult to predict and will depend primarily on what gives us the greatest tactical advantage. Anyone wishing to join the action should get on board quickly or risk being left out.”

With the aggregate value of the claims against Clydesdale’s new parent CYBG possibly running to several hundred million pounds, the impact could be considerable for the lender which made a statutory profit of just £77m last year.

A CYBG spokeswoman said: ”Whilst we have seen reports of a potential claim being considered in relation to Tailored Business Loans, we have not received any such claim to date from RGL Management Ltd and it is therefore not possible to comment on speculation around any potential case or the basis for any claim.

“In relation to Tailored Business Loans, this is a long-standing historical matter which has been subject to significant scrutiny and which the Bank has been working through with customers as part of a wide-ranging remediation programme, in an open and transparent manner.

“We have made significant progress in resolving the vast majority of cases. Where we have reached a final agreement with customers, the cost of this has been covered by existing provisions as extensively disclosed in our financial reports.”


About TBLs

‘Tailored Business Loan’ (“TBL”) was the term used to refer to a brand of over 11,000 fixed and variable rate loans made to Clydesdale and Yorkshire Bank customers between 2001 and 2012. More than 8,000 of these were fixed rate TBLs which purportedly contained embedded or hidden swaps which were not disclosed to customers who thought they were entering into a simple fixed rate loan. The swap or hedging element was similar to that of a standalone interest rate hedging product, in particular, through the purported hedge Clydesdale sought to charge disproportionate and crippling break costs in the event that customers wanted to exit the loan early and also had the effect of locking them into higher interest rates and higher bank margins as interest rates fell.