RBS 2014 Annual Report Download - page 112

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RBS – Interim Results 2015
Notes
16. Litigation, investigations and reviews (continued)
RBS is responding to investigations and inquiries from other governmental and regulatory authorities on
similar issues relating to failings in its FX business within its CIB segment, including with respect to potential
collateral consequences of the RBS plc guilty plea described above. The timing and amount of financial
penalties with respect to any further settlements and related litigation risks and collateral consequences
remain uncertain and could be material.
On 21 July 2014, the Serious Fraud Office in the UK announced that it was launching a criminal investigation
into allegations of fraudulent conduct in the foreign exchange market, apparently involving multiple financial
institutions. At this stage, as there remains considerable uncertainty around the outcome of this investigation
it is not practicable reliably to estimate the aggregate impact, if any, on RBS which may be material.
Interest rate hedging products (IRHP) redress programme
In June 2012, following an industry wide review, the FSA announced that RBS and other UK banks had
agreed to a redress exercise and past business review in relation to the sale of interest rate hedging
products to some small and medium sized businesses classified as retail clients or private customers under
FSA rules. In January 2013 the FSA issued a report outlining the principles to which it wished RBS and other
UK banks to adhere in conducting the review and redress exercise. This exercise is being scrutinised by an
independent reviewer, KPMG (appointed as a Skilled Person under section 166 of the Financial Services
and Markets Act), who is reviewing and approving all redress outcomes, and the FCA is overseeing this.
RBS has reached agreement with KPMG in relation to redress outcomes for almost all in scope customers.
RBS and KPMG are now focussing on customer responses to review outcomes, securing acceptance of
offers and assessing ancillary issues such as consequential loss claims. The review and redress exercise
was closed to new entrants on 31 March 2015.
The Central Bank of Ireland also requested Ulster Bank Ireland Limited (UBIL), along with a number of Irish
banks, to undertake a similar exercise and past business review in relation to the sale of IRHP to retail
designated small and medium sized businesses in the Republic of Ireland. RBS also agreed to undertake a
similar exercise and past business review in respect of relevant customers of RBS International. The review
undertaken in respect of RBS International customers is complete, and the review in respect of UBIL
customers is expected to be completed in Q3 2015.
RBS provisions in relation to the above redress exercises total £1.5 billion to date for these matters, of which
£1.2 billion had been utilised at 30 June 2015.
Judicial Review of Skilled Person’s role in IRHP review
RBS has been named as an interested party in three petitions for judicial review of KPMG’s decisions as
Skilled Person in RBS’s previously disclosed IRHP redress programme. This follows a similar petition from a
customer of another UK bank, also against KPMG.