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RBS sets aside extra £3bn for litigation and claims

Royal Bank of Scotland has set aside an additional £3bn for litigation and claims, including payment protection insurance and mortgage-backed securities claims.

In a trading update published today, RBS says it has made provisions of £1.9bn to cover claims and conduct matters, primarily relating to mortgage-backed securities and securities litigation, following recent third party settlements and regulatory decisions.

In addition, the bank has set aside an extra £465m for PPI redress, taking its total provision for PPI so far to £3.1bn.

RBS says PPI claims in the final quarter of 2013 continued at previous rates, rather than declining as anticipated, and claims are now expected to continue for a longer period.

The bank has also made a further £500m provision for interest rate swaps redress. It says this reflects higher than expected claims volumes and redress payments.

The bank’s total provision for interest rate swaps, including expenses, was £1.25 billion as of 31 December 2013.

RBS chief executive Ross McEwan says: “Billions of pounds have been spent to resolve conduct and litigation issues in recent years. Costs on this scale were not predicted by anyone when RBS was rescued in 2008.

“They come in addition to the costs of restructuring the bank’s bad assets and restoring its funding to prudent levels after the financial crisis.

“After five years of hard work and tough choices, the path ahead for RBS is much clearer. We have restored our fundamental soundness and have the financial strength to deal with issues like this.”

RBS also announced that its executive committee will not receive bonuses this year. McEwan has already said he will not take a bonus for the bank’s 2013 or 2014 performance. 

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. This is extraordinary! They STILL don’t know the full extent of mis-selling and outstanding litigation.

    And this is just on the mis-selling scams we actually know about (PPI and interest rate swaps) Who’s to say that there aren’t more horror stories buried away in the vaults that haven’t come to light yet.

  2. Shouldn’t he have said “Billions of pounds of tax payers money have been spent to resolve conduct and litigation issues in recent years. Costs on this scale were not predicted by anyone when RBS was rescued in 2008.

    Questions have to be asked if it was not predicted. Why have they continue to pay bonuses to staff . Surley the staff should be lucky to have a job unlike the millions of ordinary workers that have lost their this due to bankers extravagance and incompetence.

    Mind you banking is not a normal business and they seem to work in a different set of rules and principles to other businesses in the UK.

    It one rule for them and another for the small busines they have destroyed over the last few years stop

  3. The guys who are there now are just cleaning up the mess they inherited from ex colleagues. If RBS is able to continue to set aside such huge sums it must tail off at some point and we’ll have a good bank again underneath. I wonder how much of the PPI repayments and other compensation being paid out to consumers and small businesses has helped sustain the wider economy. Some if it must have filtered through to retail spending, or been used to pay down other debts people had, so in a way it’s quite fortunate that the banks have had to pay out so much.

  4. Matthew Barsauckas 27th January 2014 at 5:12 pm

    Lets be sure about one thing. Genuine claims are being addressed and remediation is now being actioned.

    We deal daily with complaint & Claims Handling on behalf of Financial Service Providers; Banks, Lenders, IFAs, Insurance & CC Companies et al.

    These monies are rightly due and mis-sold client issues are being properly addressed, at last.

    But there are much bigger UK economic issues ahead and we need to focus on them.

    We all need healthy functioning banks, properly governed and compliance monitored.

    If you have ever been in an EU Country and found that you cannot draw out your cash from an ATM for many weeks on end (Country wide), it gives a whole new meaning to the term banking problems.

    Thankfully we have not and will not experience that in the UK.

  5. Compensation and jubilation we want the world to know we chuck money away (set to the Cliff Richard tune).

    Our compensation culture is progressing so wildly that soon is someone goes into a shop to buy something the shopkeeper will just hand back the payment with the product as immediate compensation and then we’ll all go bust. Responsibility? Common sense? Wassat?

  6. Let us not forget the massive lack of regulatory oversight of these activities which, had the regulator of the day been doing its job properly, could have been largely avoided.

    It’s not even as if PPI is a complex product. Strict adherence to a fairly simple proforma would have identified with little difficulty just which customers were and were not eligible for the cover provided by policies of this type. The regulator should also have stepped in to prevent salespeople hustling customers into signing up for a policy without being sure whether or not they actually wanted it. It should have been a regulatory requirements that all recommendations must be properly written up within no more than a week of the sale, with a 30 day cooling off period.

    As a result, the epidemic of mis-selling simply wouldn’t have happened. How can it be that regulation costs such colossal amounts of OPM yet still it’s failed time after time to prevent marketwide systemic scandals of this sort?

    Surely Hector Sants should have been called before the TSC to answer that question? Then again, even if he had been, he would have blustered his way out of it and the TSC would have been powerless to do anything about it. What a sorry state of affairs.

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