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RBS sets aside £3.1bn for compensation and fines

by Eleanor Lawrie on Jan 28, 2014 at 08:00

RBS sets aside £3.1bn for compensation and fines

Royal Bank of Scotland has made provisions for £3.1 billion in claims, with £1.9 million stemming from issues around mortgage-backed securities, and securities related litigation.

Elsewhere, £465 million would be made available for PPI redress, as claims have continued to cost around £225 million per quarter,'rather than declining as anticipated' the group said in an unexpected trading update.

A further £500 million will be set aside for claims and administration costs relating to interest rate hedging products.

'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. They were a key reason we took the difficult decisions to reset our capital position last November,' RBS chief executive Ross McEwan (pictured) said in a statement.

The bank's executive committee also said they would not be taking a bonus for 2013, joining McEwan who has already forfeited his.

Standard & Poor's ratings agency said its rating of RBS as A-/A-2 would remain unchanged on the news, as these issues had already been factored into its assessment of the company.

'The additional provisions are consistent with our view that, notwithstanding the accelerated reduction of higher risk assets, RBS' path to sustainable organic capital build continues to be postponed and remains difficult,' the agency said in a note.

'The provisions also support our view that the group's sizable exposure to litigation and conduct risks continues to constrain our assessment of its risk position.'

Full year results for RBS will come out on 27th February.

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