RBS sets aside $6b for litigation, compensation claims in Britain, US

LONDON (AFP) - Britain's state-controlled Royal Bank of Scotland (RBS) has set aside more than 3 billion pounds (S$6.3 billion) for litigation and compensation claims in Britain and in the United States.

The total includes 1.9 billion pounds to cover largely US action over mortgage-backed financial products, RBS said in a surprise statement that sent its shares sliding. The bank added it has made another 465 million-pound provision for compensation for the mis-selling of payment protection insurance (PPI), which covered repayments on credit products such as consumer loans or mortgages in Britain.

The Edinburgh-based lender said it would take another 500 million-pound provision over the mis-selling of interest rate hedging products, known as swaps, to small businesses in Britain. There will also be an extra 200 million pounds for "for various conduct related and legal expenses" when the bank publishes its fourth-quarter results next month.

RBS made the shock statement ahead of the stock market close, sending its share price sliding 2.21 per cent to finish at 332.2 pence on London's FTSE 100 index.

RBS remains 81 per cent owned by the state, after it was rescued with 45.5 billion pounds of taxpayers' cash at the height of the 2008 global financial crisis, making it the world's biggest-ever banking bailout.

Chief executive Ross McEwan noted on Monday that before the crisis began, RBS was the biggest bank in the world.

"When the crisis broke the bank was involved in a number of different businesses in multiple countries that have subsequently faced heavy scrutiny by customers and regulators," he said.

"The scale of the bad decisions during that period means that some problems are still just emerging. The good news is we are now a much stronger bank and can manage these costs while still supporting our customers."

The group said the extra 1.9 billion pounds for mortgage-backed securities was announced "following recent third party litigation settlements and regulatory decisions".

Register here to get free digital access to The Straits Times until Aug 9, 2015.
Comments