Banking Blues

RBS reports losses, increases payments to customers for faulty products, and then there’s LIBOR

November 2, 2012
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November 2, 2012
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More problems for British banksAP Images / Sang Tan

Royal Bank of Scotland (RBS) joined Barclays and Lloyds this week in reporting third-quarter losses, partly tied to provisions made to repay customers sold unnecessary loan insurance. RBS’s third-quarter net losses were £1.4 billion (£2.2 billion) on revenue of £4.9 billion. A year ago, the company made a net profit of £1.2 billion. (See full results here).

In total, RBS has set aside £1.7 billion since regulators ordered banks to compensate customers for the faulty insurance. This brings the total set aside by British banks to more than £10 billion.

In another client-related fiasco, RBS has allocated £50 million to pay customer claims following computer outages last summer during which individuals and business clients couldn’t access accounts. The total provisioned here is now £175 million.

And then there’s LIBOR. The earnings statement said:

The Group is also under investigation by competition authorities in a number of jurisdictions including the European Commission, US Department of Justice (Antitrust Division) and Canadian Competition Bureau, stemming from the actions of certain individuals in the setting of LIBOR and other trading rates, as well as interest rate-related trading. The Group is also co-operating fully with these investigations.

The Group expects to enter into negotiations to settle some of these investigations in the near term and believes the probable outcome is that it will incur financial penalties.

The UK’s largest state-controlled bank didn’t comment on how much that penalty might be, but Barclays was fined $450 million the past summer by US and UK regulators to settle LIBOR claims. RBS has already dismissed “a number of employees for misconduct” following internal investigations.

Stephen Hester, chief executive, said in the earnings statement:

The extraordinary challenges which RBS faced following the financial crisis are being worked through successfully.

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