Royal Bank of Scotland is on track to report up to £8bn in losses for 2013 after taking a fresh hit for conduct and mis-selling issues, forcing its top management to refuse any bonuses for the year.
In an unscheduled trading statement, the 81% taxpayer-owned bank revealed it would incur an extra £2.9bn of losses for conduct-related matters over the sub-prime mortgage crisis in the US and mis-selling of payment protection insurance and interest rate swaps.
The additional costs come on top of losses of £4.5bn from the creation of a mini-bad bank inside RBS and, according to initial estimates, could drive the bank to losses of around £8bn by the time it reports its full-year results at the end of next month.
The move appears to push back any prospect of chancellor George Osborne selling off any of the taxpayer's stake, bought for £45bn during the banking crisis in 2008 and 2009.
Ross McEwan, who took over as chief executive on 1 October, had already said he would not a take a bonus for 2013 and the rest of his eight-strong executive committee will also forgo their multimillion-pound payments.
The New Zealander, promoted from running the retail bank after his predecessor Stephen Hester's sudden departure, said that the scale of the costs incurred from past mistakes had not been expected at the time of the bailout.
"They come in addition to the costs of restructuring the bank's bad assets and restoring its funding to prudent levels after the financial crisis. They were a key reason we took the difficult decisions to reset our capital position last November," McEwan said.
"At the peak of the financial crisis, RBS was the biggest bank in the world. When the crisis broke the bank was involved in a number of different businesses in multiple countries that have subsequently faced heavy scrutiny by customers and regulators. The scale of the bad decisions during that period means that some problems are still just emerging. The good news is we are now a much stronger bank and can manage these costs while still supporting our customers," he added.
The extra £2.9bn includes £1.9bn for various claims and past conduct issues facing the bank, most likely the potential cost of a settlement with US regulators over subprime mortgages, another £465m for PPI mis-selling, taking the total cost to £3.1bn, and another £500m for interest rate swap mis-sellling, taking the total to £1.3bn.
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