RBS 2008 Annual Report Download - page 254

253RBS Group Annual Report and Accounts 2008
On 16 July 2008, the OFT published the results of its market study into
personal current accounts in the United Kingdom. The OFT found
evidence of competition and several positive features in the personal
current account market but believes that the market as a whole is not
working well for consumers and that the ability of the market to function
well has become distorted. The OFT is currently consulting with the
banking industry, consumer groups and interested parties on its report.
After this consultation the OFT will decide on next steps, which could
include further discussions or agreed remedies with the industry, or
possibly a reference of the market to the CC.
The OFT’s investigation into the fairness of bank current account
charges is ongoing. On 12 August 2008, the OFT indicated to the Group
and other banks that, although it had not concluded its investigation and
had reached no final view, it had serious concerns that contractual
terms relating to Relevant Charges in personal current account
agreements were unfair under the Regulations. The OFT is currently
consulting with the Group and other banks on this issue. Given the
stage of the investigation, the Group cannot reliably estimate the impact
of any adverse outcome of the OFT’s market study or investigation upon
it, if any. However, the Group is co-operating fully with the OFT to
achieve resolution of the matters under investigation.
On 26 January 2007, the FSA issued a Statement of Good Practice
relating to Mortgage Exit Administration Fees. On 1 March 2007, the
Group adopted a policy of charging all customers the fee applicable at
the time the customers took out the mortgage or, if later, varied their
mortgage. The Group believes that it is currently in compliance with the
Statement of Good Practice and will continue to monitor its performance
against those standards.
United States
In July 2004, ABN AMRO signed a written agreement with the US
regulatory authorities concerning ABN AMRO’s dollar clearing activities
in the New York branch. In addition, in December 2005, ABN AMRO
agreed to a Cease and Desist Order with the Dutch Central Bank and
various US federal and state regulators. This involved an agreement to
pay an aggregate civil penalty of US$75 million and a voluntary
endowment of US$5 million in connection with deficiencies in the US
dollar clearing operations at ABN AMRO’s New York branch and OFAC
compliance procedures regarding transactions originating at its Dubai
branch. ABN AMRO and members of ABN AMRO’s management
continue to provide information to law enforcement authorities in
connection with ongoing criminal investigations relating to ABN AMRO’s
dollar clearing activities, OFAC compliance procedures and other Bank
Secrecy Act compliance matters. The Cease and Desist Order with the
Dutch Central Bank was lifted on 26 July 2007 and the Cease and Desist
Order agreed with the US authorities was lifted on 9 September 2008.
Although no written agreement has yet been reached and negotiations
are ongoing, ABN AMRO has reached an agreement in principle with the
US Department of Justice that would resolve all presently known aspects
of the ongoing investigation. Under the terms of the agreement in
principle, ABN AMRO and the United States would enter into a deferred
prosecution agreement in which ABN AMRO would waive indictment and
agree to the filing of information in the United States District Court
charging it with certain violations of federal law based on information
disclosed in an agreed factual statement. ABN AMRO would also agree
to continue co-operating in the United States’ ongoing investigation and
to settle all known civil and criminal claims currently held by the United
States for the sum of US$500 million. The precise terms of the deferred
prosecution agreement are still under negotiation.
These compliance issues and the related sanctions and investigations
have had, and will continue to have, an impact on ABN AMRO’s
operations in the United States, including limitations on expansion. ABN
AMRO is actively exploring all possible options to resolve these issues.
The ultimate resolution of these compliance issues and related
investigations and the nature and severity of possible additional
sanctions cannot be predicted.
The New York State Attorney General has issued subpoenas to a wide
array of participants in the sub-prime mortgage industry, including
mortgage originators, appraisers, due diligence firms, investment banks
and rating agencies, focusing on the information underwriters obtained
as part of the due diligence process from the independent due
diligence firms and whether that information is adequately disclosed to
investors. RBS Greenwich Capital has produced documents requested
by the New York State Attorney General principally related to sub-prime
loans that were pooled into one securitisation transaction.
In addition to the above, certain of the Group’s subsidiaries have
received requests for information from various US governmental
agencies and self-regulatory organisations including in connection with
sub-prime mortgages and securitisations, collateralised debt obligations
and synthetic products related to sub-prime mortgages. In particular,
during March 2008, the Group was advised by the SEC that it had
commenced a non-public, formal investigation relating to the Group’s
US sub-prime securities exposures and US residential mortgage
exposures. The Group and its subsidiaries are co-operating with these
various requests for information and investigations.
Litigation
United Kingdom
In common with other banks in the United Kingdom, the Royal Bank and
NatWest have received claims and complaints from a large number of
customers challenging unarranged overdraft charges (the ‘Charges’) as
contravening the Unfair Terms in Consumer Contracts Regulations 1999
(the ‘Regulations’) or being unenforceable penalties (or both).
On 27 July 2007, the OFT issued proceedings in a test case against the
banks which was intended to determine certain preliminary issues
concerning the legal status and enforceability of contractual terms
relating to the Charges. Because of the test case, most existing and
new claims in the County Courts are currently stayed, the FSA
temporarily waived the customer complaints-handling process and there
is a standstill of Financial Ombudsman Service decisions.