Royal Bank of Scotland is the latest bank preparing for a fine for rigging the currency markets, by setting aside £400m to cover the cost of the investigation into the £3.5tn-a-day market.
The 81% taxpayer-owned bank is also adding £100m to its provisions to cover the cost of mis-selling payment protection insurance, following moves by other high street banks to respond to increased applications for compensation in what is already the costliest misselling scandal in history.
The provision for foreign exchange rigging follows moves by Barclays and the US bank Citigroup to put millions of pounds aside to cover the potential penalties expected to be imposed by regulators in the US and the UK. The decision to allocate funds indicates that the banks believe the penalties could be imposed soon; a coordinated settlement with up to six banks is expected next month.
Ross McEwan, a year into his role as chief executive of the bailed-out bank, acknowledged that the fines would continue to dent RBS’s reputation, but highlighted improved results.
He said: “We are reducing costs, and are on track to achieve our capital targets. UK and Ireland are showing signs of growth, and impairment trends are significantly better than we had anticipated at the start of the year. But we know we still have a long list of conduct and litigation issues to deal with and much, much more to do to restore our customers’ trust in us.”
Among the other issues facing RBS are fines for the IT meltdown in 2012, which left customers locked out of their accounts, including those at Ulster Bank. RBS said it expected to enter settlement talks with the Irish regulators at the end of the year. It has put aside another £180m for other potential conduct issues.
Profits at RBS in the three months to the end of September were £1.3bn, compared with a £634m loss during the same period a year ago. For the nine-month period, profits were up from £3.9bn against £740m a year ago.
RBS has been reviewing its ownership of Ulster Bank, which McEwan said “remains a core part” of the bank despite having blown a £15bn hole in RBS’s accounts since the 2008 bailout.
“We have a good market position and believe that, with investment, Ulster Bank can deliver attractive shareholder returns in the future,” said McEwan.
RBS has released provisions previously set aside for bad debts of £801m in the last quarter, compared with £93m in the previous quarter – largely from Ulster Bank and its bad division. It also expects to release further provisions in the last quarter of the year.
“The outlook for 2015 remains relatively benign, albeit with some risks to the downside. At such low levels of impairments there may be volatility in any quarter,” the bank said.
