RBS 2014 Annual Report Download - page 102

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RBS – Interim Results 2015
Notes
16. Litigation, investigations and reviews
Litigation, investigations and reviews
The Royal Bank of Scotland Group plc (the company or RBSG plc) and certain members of the Group are
party to legal proceedings and the subject of investigation and other regulatory and governmental action in
the United Kingdom, the European Union, the United States and other jurisdictions.
RBS recognises a provision for a liability in relation to these matters when it is probable that an outflow of
economic benefits will be required to settle an obligation resulting from past events, and a reliable estimate
can be made of the amount of the obligation. While the outcome of the legal proceedings, investigations and
regulatory and governmental matters in which RBS is involved is inherently uncertain, the directors believe
that, based on the information available to them, appropriate provisions have been made in respect of legal
proceedings, investigations and regulatory and governmental matters as at 30 June 2015 (see Note 5). The
aggregate provisions for regulatory and legal actions of £1.2 billion recognised during the six months ended
30 June 2015, included anticipated costs following investigations into the foreign exchange market (£334
million), provisions in respect of mortgage-backed-securities related litigation (£506 million), provisions
relating to packaged accounts (£157 million) and other conduct provisions (£160 million).
In many proceedings and investigations, it is not possible to determine whether any loss is probable or to
estimate the amount of any loss, either as a direct consequence of the relevant proceedings and
investigations or as a result of adverse impacts or restrictions on RBS’s reputation, businesses and
operations. Numerous legal and factual issues may need to be resolved, including through potentially
lengthy discovery and document production exercises and determination of important factual matters, and by
addressing novel or unsettled legal questions relevant to the proceedings in question, before a liability can
reasonably be estimated for any claim. RBS cannot predict if, how, or when such claims will be resolved or
what the eventual settlement, damages, fine, penalty or other relief, if any, may be, particularly for claims
that are at an early stage in their development or where claimants seek substantial or indeterminate
damages.
There are also situations where RBS may enter into a settlement agreement. This may occur in order to
avoid the expense, management distraction or reputational implications of continuing to contest liability, or in
order to take account of the risks inherent in defending claims or investigations even for those matters for
which RBS believes it has credible defences and should prevail on the merits. The uncertainties inherent in
all such matters affect the amount and timing of any potential outflows for both matters with respect to which
provisions have been established and other contingent liabilities.
The future outflow of resources in respect of any matter may ultimately prove to be substantially greater than
or less than the aggregate provision that RBS has recognised. Where (and as far as) it is indicated that
liability cannot be reasonably estimated, no provision has been recognised.
Other than those discussed below, no member of the Group is or has been involved in governmental, legal
or regulatory proceedings (including those which are pending or threatened) that are expected to be material
individually or in aggregate. RBS expects that in future periods additional provisions, settlement amounts,
and customer redress payments will be necessary, in amounts that are expected to be material in some
instances.