RBS may face further action by financial regulator

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The financial regulator has said it may take “further action” over the way Royal Bank of Scotland mistreated some small business customers.

The Financial Conduct Authority has published an interim report into failings by the RBS division that dealt with struggling businesses.

The Global Restructuring Group was found to have “widespread” mistreatment of customers in some areas.

RBS said it had acknowledged failings and again apologised for its mistakes.

The FCA report identified a number of failings, including that 92% of viable firms handled by GRG suffered “inappropriate action”, such as interest charges being raised or unnecessary fees added.

It was cleared in others, according to the report prepared for the regulator.

FCA chief executive Andrew Bailey said: “We are investigating the matters arising from the [report] and are focusing on whether there is any basis for further action within our powers.”

The bank has set aside £400m for compensation and paid out £115m, chief executive Ross McEwan said.

The BBC reported on a leaked copy of the report in August, leading to political pressure on the FCA to publish more of the findings.

The regulator was initially reluctant to do so, but gave in to pressure from MPs and campaigners.

GRG operated from 2005 to 2013 and at its peak handled 16,000 companies.

But Mr McEwan said the “most serious allegations made against the bank have not been upheld”.

That includes finding the bank did not set out to engineer ways of transferring customers to GRG, or make requests of directors that were “unnecessarily burdensome”.

“The culture, structure and way RBS operates today have all changed fundamentally since the period under review,” he said.

‘Not before time’

The bank has dealt with more than 900 complaints going back a decade, Mr McEwan added.

However, the report found that inappropriate treatment of small business customers was “widespread” in areas including:

  • A failure to support small businesses in ways consistent with good turnaround practice
  • Placing an undue focus on price increases and debt reduction without considering customers’ longer-term viability
  • A failure to handle customer complaints fairly and to deal with certain conflicts of interest

It also found senior GRG managers were encouraged to place “financial objectives first and emphasised the need for continuing financial performance”.

Nicky Morgan, who chairs the Treasury select committee, said: “It has taken the FCA too long to publish its summary of the skilled persons’ report, so this is not before time.”

Mr Bailey is due to appear before the committee on 31 October.

‘Incompetent or criminal’

Bill Esterson, Labour’s shadow business minister, called for a judge-led inquiry, adding: “Trust between small businesses and our financial institutions needs to be restored.”

The RGL management group, which represents some former business customers of RBS, said the FCA report appeared to be a whitewash.

“From what we understand, the FCA has failed to acknowledge the serious and deliberate harm caused to businesses through RBS’ Global Restructuring Group,” it said.

“The FCA is making excuses in its interim report as to why it cannot bring the bank to justice, which does nothing to help redress the devastation inflicted on business owners by RBS.”

Lawrence Tomlinson, author of a 2013 report into GRG, said: “Banks do not treat their customers inappropriately, bankers do.

“The authorities should look at whether these bankers’ behaviour is incompetent or criminal – either way, whoever allowed the scandal at GRG to occur should not be allowed to work in the sector or enable similar ethos and culture to enter other banking institutions.”

Lloyds sets aside another £700m for PPI insurance claims

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Lloyds Banking Group has set aside another £1bn to cover the cost of insurance mis-selling and the treatment of mortgage customers.

Another £700m will cover payment protection insurance (PPI) claims and £283m will be used to repay about 590,000 mortgage holders.

The bank had already put away an extra £350m this year to cover PPI costs.

It came as Lloyds posted half-year pre-tax profits of £2.5bn, 4% higher than last year.

The results are the first since the government sold its stake in the bank.

The repayment to mortgage customers comes after they were charged from 2009 to 2016 for going into arrears.

The Financial Conduct Authority had been investigating the issue, concluding that the charges should not have been applied as the bank did not always do enough to understand customers’ circumstances and check that their arrears payment plans were affordable and sustainable.

The FCA says Lloyds will refund all fees charged for arrears management and broken payment arrangements, and it will also pay any litigation fees that were applied unfairly to customers who were involved in related legal action.

On top of that, it will also offer payments for potential distress and inconvenience.

The bank will itself approach customers to prompt them to make a claim.

Fraud probe

Lloyds became the UK’s biggest force in personal banking as a result of its absorption of HBOS – the former Halifax and Bank of Scotland – at the height of the financial crisis and was bailed out by the government at a cost of about £20bn.

Lloyds is also having to compensate some of its small business customers, who suffered as a result of widespread fraud at its former HBOS branch in Reading.

Victims saw their businesses taken over by so-called specialists recommended by the branch between the years 2003-07.

These “specialists” destroyed a number of the businesses, squandering the money they made on prostitutes and luxury holidays.

Lloyds is in the process of paying compensation to the victims of the fraud, for which it set aside £100m in the first quarter.

It is also currently undertaking a review of what happened.

Crisis legacy

It is the PPI mis-selling scandal, though, that dwarfs all others.

Lloyds has now increased provisions for claims some 17 times. Its chief financial officer, George Culmer, said it was “disappointing” to be having to do it again.

He also offered no guarantee that there would be no further increases in provisions, although he did say the number “looked appropriate in terms of covering us between now and August 2019”.

Lloyds alone has now set aside £18bn. In total, UK lenders have been forced to set aside more than £30bn to cover PPI compensation costs.

PPI became controversial after it was revealed that many customers had been sold it without understanding that the cost was being added to their loan repayments.

The bank’s chief executive, Antonio Horta-Osario, said of the various pots of money set aside for customer redress: “We have a commitment as a management team of putting these legacy charges behind us as soon as possible.”

He admitted, though, that there would “always be redress costs” when running a banking business.


Laith Khalaf, senior analyst at stockbrokers Hargreaves Lansdown, said that despite the size of the provisions for the various types of misconduct, Lloyds’ performance was satisfactory.

“It’s a sign of Lloyds’ strength that it can shrug off £1.6bn of misconduct charges to post a strong rise in profits,” he said.

“Overall, this is a strong set of numbers from Lloyds, blighted, but not overshadowed, by misconduct costs. The government has exited the bank and is now no longer selling stock in the market, which removes a significant downward pressure on the share price.”

The government had been steadily offloading its Lloyds stake, resulting in about £21bn being returned to the taxpayer.

The government still owns 73% of Royal Bank of Scotland, which was rescu

Lloyds misses own compensation deadline

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Victims of a one billion pound fraud have criticised Lloyds Banking Group for failing to meet its own deadline for paying compensation.

In the wake of guilty verdicts in a fraud trial that ended in February, Lloyds said it would offer compensation to the victims by the end of June.

However, now the deadline has arrived, only a small fraction of the £100m it set aside has so far been paid out.

Lloyds, which bought HBOS in 2009, has yet to comment.

In the HBOS fraud, two corrupt HBOS bankers pressured small business customers into hiring a firm of so-called turnaround consultants called Quayside Corporate Services, led by David Mills.

Mills and his accomplices bribed the bank managers with cash, gifts and prostitutes, then used their relationship with the bank to bully the business owners into handing over exorbitant fees and, eventually, control of their companies. Many business owners were not only ruined but lost their marriages and their health.

Mills and the others, including former HBOS banker Lynden Scourfield, were convicted in January of various charges of fraud, corruption and money laundering between 2003 and 2007.


After years of denying any knowledge of criminality, Lloyds Banking Group came under pressure to take responsibility for crimes committed by its own staff. On 27 April the bank said it would offer victims compensation by the end of June.

However, the victims say the bank’s compensation scheme isn’t impartial. Of the 64 who’ve joined it, it’s understood that fewer than 10 have received offers and only one settlement has been reached. Lloyds has yet to comment.

Dozens more victims have declined to join the scheme amid concern that the bank is seeking to dictate terms, imposing its own compensation scheme rather than consulting them.

The bank is expected to provide an update on its treatment of the victims of the crime later today.


Nigel Morgan, whose family lost millions and was driven into bankruptcy following the fraud, says the bank refused to help him with a modest sum to prepare a compensation claim. He says the bank has made no effort to try to reverse the bankruptcy and the trustee in bankruptcy now wants to control the claim for compensation.

“It’s been 12 years since we were ruined by this and a very tough 12 years. I thought the bank would be decent enough to admit when it was wrong – but the way they’re behaving to the victims is disgusting. The first thing they should have done is to send someone round and apologise unreservedly.

“We’re constantly living on the edge, worried we won’t keep what we have left; I’m having panic attacks every day. It’s just an awful situation.”

RBS investors ready to settle share sale legal dispute

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A group of small shareholders has reached a settlement with RBS over claims that they were misled about the bank’s health before it asked investors for £12bn in 2008.

The 9,000-strong RBS Shareholders Action Group has confirmed that it has accepted 82p a share.

It is almost double the original offer made by RBS.

The case will now go back to the High Court on Thursday where Mr Justice Hildyard will hear if it will proceed.

The RBS Shareholders Action Group sent a letter to its members over the weekend recommending the offer – which is less than the 92p a share compensation some investors had hoped to secure.

It is also below the 200p-230p that investors paid to buy shares in the rights issue nine years ago.

“Having carefully considered the merits of the current offer… we have decided to accept the offer of 82 pence per share on behalf of our membership,” the action group said in a letter dated 27 May that was published on Monday.”

It added: “This is a decision which is fully supported by our legal advisers.”

The settlement is worth about £200m in total.

Court case adjourned

The case had been due to start on Monday, 22 May, and had been scheduled to last for 14 weeks.

However, it was adjourned and the parties began discussions over reaching a settlement.

The dispute centres on RBS’s decision, during the financial crisis, to ask shareholders for billions of pounds worth of funds after it bought Dutch rival ABN Amro.

Shortly afterwards, the government was forced to prop up the bank with £45bn of taxpayers’ money to save it from collapse. The state still owns a 72% stake in RBS.

The bank and former directors deny any wrongdoing.

The bank has already settled the majority of claims over the issue, but has not admitted liability.

Lloyds to pay redress for mis-sold structured products

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Bank to offer compensation to 7,000 customers that could amount to more than £40m

High street banking stalwart Lloyds Banking Group could be forced to pay back more than £80 million ($102.83 million) to deal with a fresh mis-selling scandal, soon after the conclusion of the notorious payment protection insurance saga.

The Times reports on Friday that the bank has started the process of writing to more than 7,000 customers holding accounts with Lloyds and Scottish Widows, its investments arm, offering them compensation if they bought certain structured investment products in the past.

Many of these products were marketed when sold as being simple and low risk, but turned out to be highly complex instruments, with a pair of products called the Acorn Market Linked Deposit and Protected Capital Solution Funds at the centre of the issue. The funds were sold to customers of what was at the time Lloyds TSB and Scottish widows.

The product, which was sold by Lloyds TSB between 2008 and 2010 “was in breach of providing fair, clear and not misleading promotions, because it provides the consumer with a misleading impression of the likely return,” according to a Financial Conduct Authority letter cited by the bank’s trade union, the LTU.

The LTU wrote in a newsletter on Wednesday that it expects combined compensation to reach as much as £82 million for all the products.

“We estimate that the total amount of compensation will be £66 million. In addition, Scottish Widows is also paying out £18 million to 3,500 customers who were mis-sold Protected Capital Solution Funds. We expect that further product reviews will see more customers receiving compensation,” the union said.

Lloyds does not expect the bill to be as high, The Times reports.

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