RBS 2013 Annual Report Download - page 454
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Notes on the consolidated accounts
452
22 Accruals, deferred income and other liabilities continued
(2) The Group has estimated £1,250 million for its liability in respect of the sale of Interest Rate Hedging Products based on experience, having now
agreed a substantial number of outcomes with the independent skilled person appointed to review all decisions. The provision includes redress that
will be paid to customers, interest payable on customer redress, the cost to the Group of exiting the hedging positions and the cost of undertaking
the review. It does not include provision for any consequential losses that customers may have suffered as the Group is unable to reliably measure
any liability it may have for such losses.
The principal assumptions underlying the Group’s provision are:
• the proportion of relevant customers that will not opt in to the review
• the number of transactions that qualify for redress
• the nature of the redress (in particular whether a product is terminated or replaced with an alternative product and/or a different profile)
• the cost of the review
Sensitivity
Assumption
Change in
assumption
%
Consequential
change in provision
£m
Proportion of relevant customers that will not opt in to the review +/-5 +/-47
Proportion of customer transactions qualifying for redress +/-5 +/-71
Average redress +/-5 +/-71
Uncertainties remain over the number of transactions that will qualify for redress and the nature and cost of that redress.
Background information in relation to Interest Rate Hedging Products claims is given in Note 32.
(3) The Group has provided for customer redress in relation to certain other retail products. None of these provisions are individually material.
(4) On 6 February 2013, the Group reached agreement with the FSA, the US Department of Justice and the Commodity Futures Trading Commission in
relation to the setting of LIBOR and other trading rates, including financial penalties of £381 million and a provision for this amount was recognised in
2012. The Group continues to cooperate with other governmental and regulatory authorities and, as a result of progress on these matters in 2013,
the provision was increased by £315 million. For further details see Note 32.
(5) The Group is subject to a number of investigations by regulatory and other authorities. Details of these investigations and a discussion of the nature
of the associated uncertainties are given in Note 32.
(6) Arising out of its normal business operations, the Group is party to legal proceedings in the United Kingdom, the United States and other
jurisdictions. Litigation provisions at 31 December 2012 related to a number of proceedings; no individual provision was material. An additional
charge of £2,050 million was recorded in 2013 as a result of greater levels of certainty on expected outcomes, primarily in respect of matters relating
to mortgage-backed securities and securities-related litigation following third party litigation settlements and regulatory decisions. Detailed
descriptions of the Group’s legal proceedings and discussion of the associated uncertainties are given in Note 32.
(7) In June 2012, the Group experienced a technology incident that affected its transaction batch processing. Provisions of £175 million were charged
during 2012 to meet the waiver of fees and interest; redress for customers of the Group; and other costs principally staff costs. These costs have
now been settled.
(8) The property provisions principally comprise provisions for onerous lease contracts. Provision is made for future rentals payable in respect of vacant
leasehold property and for any shortfall where leased property is sub-let at a rental lower than the lease rentals payable by the Group.