UK market regulator, the Financial Services Authority (FSA), has started a probe into financial services major Royal Bank of Scotland's (RBS) acquisition of ABN Amro, says a media report.
"The FSA has begun an investigation into Royal Bank of Scotland's disastrous acquisition of ABN Amro and its subsequent 12 billion pounds rights issue," The Times has reported.
The regulatory inquiry was revealed in a footnote in RBS's interim results this month.
"In April 2009 the FSA notified the group that it was commencing a supervisory review of the acquisition of ABN AMRO in 2007 and the 2008 capital raisings. The group and its subsidiaries are co-operating fully with this review," RBS said recently in its interim result.
As per Times, the review is said to centre on how much risk was on RBS's books and whether the management should have been aware that its 12 billion pounds rights issue-— launched six months after its ABN Amro acquisition-— would not be enough to allow it to cope its toxic debt mountain.
The FSA can order companies to rectify any shortcomings in capital or impose fines on companies that fail to comply, the report added.
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RBS acquired ABN in October 2007 when Fred Goodwin was chief executive, just as the credit crunch started to take hold.
Together with Fortis and Santander, it paid a share of the euro 70 billion (60 billion pounds) price in a bid battle with Barclays, the report said.
The acquisition led to the bank launching its 12 billion pounds rights issue six months later, it added.
"But the issue, supported by thousands of private investors as well as institutions, was not enough to prevent RBS's share price from plunging further and it was eventually forced to ask the government for help. The bank received a 20 billion-pound cash injection in return for the government taking a stake," the daily said.