RBS 2014 Annual Report Download - page 113

111
RBS – Interim Results 2015
Notes
16. Litigation, investigations and reviews (continued)
The Administrative Court is still to determine whether to allow the latest three claims by RBS customers to
proceed to a full hearing, and they are both likely to be stayed pending the outcome of the other bank’s case,
in which the customer has already received permission to proceed. That case will decide whether a section
166-appointed Skilled Person is susceptible to judicial review. If so, the additional claims which seek to open
the decisions of KPMG as Skilled Person on RBS's IRHP redress programme are likely to then proceed to
full hearing and assess the fairness of KPMG’s redress programme decisions in those particular cases. If
deemed unfair, this could have a consequential impact on the reasonableness of the methodology applied to
reviewed and settled IRHP files generally.
As there remains considerable uncertainty and the judicial review is at an early stage, it is not practicable
reliably to estimate the impact of such matters, if any, on RBS which may be material.
FSA mystery shopping review
In 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. RBS was one of the
firms involved.
The action required included 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).
Subsequent to the FSA announcing the results of its mystery shopping review, the FCA has required RBS to
carry out a past business review and customer contact exercise on a sample of historic customers that
received investment advice on certain lump sum products through the UK Financial Planning channel of the
Personal & Business Banking (PBB) segment of RBS, which includes RBS plc and NatWest, during the
period from March 2012 until December 2012. This review was conducted under section 166 of the Financial
Services and Markets Act, under which a Skilled Person was appointed to carry out the exercise. Redress is
currently being paid/offered to certain customers in this sample group. Following discussions with the FCA
after issue of the draft section 166 report, RBS has agreed with the FCA that it will carry out a wider
review/remediation exercise – the precise scope of this has yet to be finalised. In addition, RBS has agreed
with the FCA that it will carry out a remediation exercise, for a specific customer segment who were sold a
particular structured product, in response to concerns raised by the FCA with regard to (a) the target market
for the product and (b) how the product may have been described to customers by certain advisers. A pilot
customer communications exercise to certain cohorts of customers was undertaken between November
2014 and January 2015 with a further communication exercise to the remaining cohorts due to be completed
during the second half of 2015.
RBS provisions in relation to investment advice total £150 million to date for these matters including for the
six months ended 30 June 2015 (of which £59 million had been utilised at 30 June 2015).