The Financial Services Authority wrote to Derek Sach, head of RBS’s Global Restructuring Group, last week after sending its officers to quiz staff and monitor the business.
One source familiar with the situation said the FSA wanted to understand state-owned RBS’s exposure to real estate through GRG, an intensive care section for distressed businesses that holds about £40bn of troubled commercial property loans, and through its West Register unit.
“A letter was sent last week,” the source said. “The FSA wants to know what happens if commercial real estate completely drops, what the risk position is.”
A second source said the FSA wanted to understand how and why some commercial property assets were moved into GRG and West Register while others were not.
RBS set up West Register in the 1990s to take on properties from distressed lending situations to avoid selling them in the open market at knockdown prices.