RBS 2013 Annual Report Download - page 480
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Notes on the consolidated accounts
478
32 Memorandum items continued
In addition to the redress exercise that is being overseen by the FCA, the
Group is also dealing with a large number of active claims by customers
who are eligible to be considered under the FCA redress programme as
well as customers who are outside of such scope due to their
sophistication. The Group is encouraging those customers that are
eligible, to seek redress under the redress scheme overseen by the FCA.
To the extent that claims are brought, the Group believes it has strong
grounds for defending these claims.
The Group has decided to undertake a similar exercise and past
business review in relation to the sale of interest rate hedging products to
retail designated small and medium sized businesses in the Republic of
Ireland and to customers of RBS International.
The Group has made provisions totalling £1.25 billion to date for this
matter, including £550 million in 2013, of which £0.2 billion has been
utilised at 31 December 2013.
Retail banking
Since initiating an inquiry into retail banking in the European Union (EU)
in 2005, the European Commission (EC) continues to keep retail banking
under review. In late 2010 the EC launched an initiative pressing for
greater transparency of bank fees and is currently proposing to legislate
for increased harmonisation of terminology across Member States. The
Group cannot predict the outcome of these actions at this stage.
FSA mystery shopping review
On 13 February 2013, the FSA announced the results of a mystery
shopping review it undertook into the investment advice offered by banks
and building societies to retail clients. As a result of that review the FSA
announced that firms involved were cooperative and agreed to take
immediate action. The Group was one of the firms involved. The action
required includes a review of the training provided to advisers,
considering whether changes are necessary to advice processes and
controls for new business, and undertaking a past business review to
identify any historic poor advice (and where breaches of regulatory
requirements are identified, to put this right for customers). The Group
will be required to appoint an independent third party to either carry out or
oversee this work. The scope and terms of the past business review and
the appointment of the independent third party remain under discussion.
The Group cannot predict the outcome of this review at this stage.
Card Protection Plan Limited
On 22 August 2013, the FCA announced that Card Protection Plan
Limited (“CPP”) and 13 banks and credit card issuers, including the
Group, had agreed to a compensation scheme in relation to the sale of
card and/or identity protection insurance to certain retail customers. CPP
has now written to affected policyholders to confirm the details of the
proposed scheme, which requires approval by a policyholder vote and by
the High Court of England and Wales. A creditors’ meeting was held on 7
January 2014, at which the creditors voted in favour of the proposed
scheme. The Group has made appropriate levels of provision based on
its estimate of ultimate exposure.
Tomlinson Report
On 25 November 2013, a report by Lawrence Tomlinson, entrepreneur in
residence at the UK government’s Department for Business Innovation
and Skills, was published (Tomlinson Report). The Tomlinson Report was
critical of the Group’s Global Restructuring Group’s treatment of SMEs.
The Tomlinson Report has been passed to the PRA and FCA. On 29
November 2013, the FCA announced that an independent skilled person
will be appointed under Section 166 of the Financial Services and
Markets Act to review the allegations in the report. On 17 January 2014,
Promontory Financial Group and Mazars were appointed as the skilled
person. The Group will fully cooperate with the FCA in its investigation.
In response to the Tomlinson Report, the Bank has instructed Clifford
Chance to conduct an independent review of the principal allegation
made in the Tomlinson Report: the Group’s Global Restructuring Group
was alleged to be culpable of systemic and institutional behaviour in
artificially distressing otherwise viable businesses and through that
putting businesses into insolvency. Clifford Chance is due to submit a
report to the Board by the end of the first quarter of 2014.
Multilateral interchange fees
In 2007, the EC issued a decision that, while interchange is not illegal per
se, MasterCard’s multilateral interchange fee (MIF) arrangements for
cross border payment card transactions with MasterCard and Maestro
branded consumer credit and debit cards in the EEA were in breach of
competition law. MasterCard was required to withdraw (i.e. set to zero)
the relevant cross-border MIF by 21 June 2008. MasterCard appealed
against the decision to the General Court in March 2008, with the Group
intervening in the appeal proceedings. The General Court heard
MasterCard’s appeal in July 2011 and issued its judgment in May 2012,
upholding the EC’s original decision. MasterCard has appealed further to
the Court of Justice and the Group has intervened in these appeal
proceedings.
The appeal hearing took place on 4 July 2013 and the Advocate
General’s (AG) opinion (which is a non binding opinion and provided to
the Court in advance of its final decision) was published on 30 January
2014. The AG opinion proposes that the Court should dismiss
MasterCard’s appeal. The Court’s decision is awaited. MasterCard
negotiated interim cross border MIF levels to apply for the duration of the
General Court proceedings. These MIF levels remain in place during the
appeal before the Court of Justice.
On 9 April 2013, the EC announced it was opening a new investigation
into interbank fees payable in respect of payments made in the EEA by
MasterCard cardholders from non-EEA countries.