PPI News

Provision to Pay PPI Refunds to Customers of RBS Increased by £100 Million

November 3, 2014

An extra £100 million has been added to the provision to pay PPI refunds to customers of RBS due to “higher than expected reactive complaint volumes”.

Details of the extra provision to pay PPI refunds to customers of RBS came in the bank´s interim financial statement for the third quarter. The additional £100 million provision to pay PPI refunds to customers of RBS brings the total value of the banking group´s PPI compensation fund to £3.3 billion.

Although much of the misselling of PPI within the RBS Group was carried out by the Nat West before it was integrated into the group, the financial statement also reveals that RBS was fined £2.8 million for poor complaint handling by the Financial Conduct Authority (FCA) earlier in the year.

In a report into RBS´ complaint handling, the FCA found that 31% of complaints made about the bank where due to the bank´s failure “to demonstrate a fair outcome for consumers”, while 62% of the complaints to the banking group were not dealt with in a suitable timeframe.

Despite increasing its fund to pay PPI refunds to customers of RBS by £100 million, the RBS Group announced profits of £1.27 billion in the third quarter of the year. This compares favourably to a loss of £634 million in the corresponding quarter of 2013 and is the first time that the RBS Group has registered a profit in three consecutive quarters since being bailed out during the financial crisis of 2008.

Although on the surface, the signs were encouraging for stakeholders, the interim financial statement also contained a warning to shareholders. The company commented that “ongoing conduct and regulatory investigations and litigation continue to present challenges and are expected to be a material drag on both earnings and capital generation over the coming quarters.”

The “ongoing conduct and regulatory investigations” referred to in the interim financial statement are likely to concern the thousands of customers who have been unsuccessful in their attempts to claim PPI refunds from RBS, and whose appeals are still being investigated by the Financial Services Ombudsman.

The Financial Services Ombudsman has said that the “uphold rate” against the RBS Group (the rate at which complaints about PPI refunds to customers of RBS are upheld after being initially rejected by the banking group) is approximately 70%. This would imply that the fund to pay PPI refunds to customers of RBS could increase further in the future.

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