RBS 2010 Annual Report Download - page 371

Other securitisation and securities related litigation in the United States
RBS Group companies have been named as defendants in a number of
purported class actions and other lawsuits in the United States that relate
to the securitisation and securities underwriting businesses. In general,
the cases involve the issuance of mortgage backed securities,
collateralised debt obligations, or public debt or equity where the plaintiffs
have brought actions against the issuers and underwriters of such
securities (including RBS Group companies) claiming that certain
disclosures made in connection with the relevant offerings of such
securities were false or misleading with respect to alleged “sub-prime”
mortgage exposure. RBS Group considers that it has substantial and
credible legal and factual defences to these claims and will continue to
defend them vigorously. RBS Group cannot at this stage reliably estimate
the liability, if any, that may arise as a result of or in connection with these
lawsuits, individually or in the aggregate, or their effect on RBS Group’s
consolidated net assets, operating results or cash flows in any particular
period.
World Online International N.V.
In November 2009, the Supreme Court in the Netherlands gave a
declaratory judgment against World Online International N.V., Goldman
Sachs International and ABN AMRO Bank N.V. (now known as The
Royal Bank of Scotland N.V.) (“RBS NV”) in relation to claims arising out
of the World Online initial public offering of 2000. It held that these
defendants had committed certain wrongful acts in connection with the
initial public offering. The judgment does not establish liability or the
amount of any loss. The defendant banks have agreed to pay settlement
sums to certain investors. RBS Group does not believe that such
settlements or any final liability or loss will have a significant effect on
RBS Group’s financial position or profitability.
Madoff
In December 2010, Irving Picard, as trustee for the bankruptcy estates of
Bernard L. Madoff and Bernard L. Madoff Investment Securities LLC filed
aclaim against RBS NV for $270 million. This is a clawback action
similar to claims filed against six other institutions in December. RBS NV
(or its subsidiaries) invested in Madoff funds through feeder funds. The
Trustee alleges that RBS NV received $71 million in redemptions from
the feeder funds and $200 million from its swap counterparties while RBS
NV “knew or should have known of Madoff’s possible fraud.” The Trustee
alleges that those transfers were preferences or fraudulent conveyances
under the US bankruptcy code and New York law and he asserts the
purported right to claw them back for the benefit of Madoff’s estate. RBS
Group considers that it has substantial and credible legal and factual
defences to the claim and intends to defend it vigorously.
Summary of other disputes, legal proceedings and litigation
Members of RBS Group are engaged in other litigation in the United
Kingdom and a number of overseas jurisdictions, including the United
States, involving claims by and against them arising in the ordinary
course of business. RBS Group has reviewed these other actual,
threatened and known potential claims and proceedings and, after
consulting with its legal advisers, does not expect that the outcome of any
of these other claims and proceedings will have significant effect on RBS
Group’s financial position or profitability in any particular period.
Investigations
RBS Group’s businesses and financial condition can be affected by the
fiscal or other policies and other actions of various governmental and
regulatory authorities in the United Kingdom, the European Union, the
United States and elsewhere. RBS Group has engaged, and will continue
to engage, in discussions with relevant regulators, including in the United
Kingdom and the United States, on an ongoing and regular basis
regarding operational, systems and control evaluations and issues,
including those related to compliance with applicable anti-bribery, anti-
money laundering and applicable sanctions regimes. It is possible that
any matters discussed or identified may result in investigatory or other
action being taken by the regulators, increased costs being incurred by
RBS Group, remediation of systems and controls, public or private
censure, restriction of RBS Group’s business activities or fines. Any of
these events or circumstances could have a significant effect on RBS
Group, its business, authorisations and licences, reputation, results of
operations or the price of securities issued by it.
Political and regulatory scrutiny of the operation of retail banking and
consumer credit industries in the United Kingdom and elsewhere
continues. The nature and impact of future changes in policies and
regulatory action are not predictable and are beyond RBS Group’s control
but could have a significant effect on RBS Group’s businesses and
earnings.
Retail banking
In the European Union, regulatory actions included an inquiry into retail
banking initiated on 13 June 2005 in all of the then 25 member states by
the European Commission’s Directorate General for Competition. The
inquiry examined retail banking in Europe generally. On 31 January 2007,
the European Commission (EC) announced that barriers to competition in
certain areas of retail banking, payment cards and payment systems in
the European Union had been identified. The EC indicated that it will
consider using its powers to address these barriers and will encourage
national competition authorities to enforce European and national
competition laws where appropriate. In addition, in late 2010, the EC
launched an initiative pressing for increased transparency of bank fees.
Multilateral interchange fees
In 2007, the ECissued a decision that while interchange is not illegal per
se, MasterCard’s current multilateral interchange fee (MIF) arrangement
for cross border payment card transactions with MasterCard and Maestro
branded consumer credit and debit cards in the European Union are in
breach of competition law. MasterCard was required by the decision to
withdraw the relevant cross-border MIF (i.e. set these fees to zero) by 21
June 2008.
369RBS Group 2010
Financial statements