RBS takes near-£7bn hit as chief executive announces bank 'clean-up'

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Royal Bank of Scotland is to take a financial hit of nearly £7bn after announcing a string of charges for legal bills, compensation and a payment to strengthen its pension fund.

The Edinburgh-based bank is pumping £4.2bn into its pension fund, in a move that will hurt its key capital base.

The new provisions include £1.5bn set aside for legal costsin anticipation of US litigation over residential mortgage-backed securities (RMBS) – which date back to the 2008 financial crisis – an extra £500m for payment protection insurance compensation and a write-down in the value of its private bank, Coutts, by £498m.

The payment into the pension fund is the result of accounting rules and will reduce the bank’s capital ratios by 0.3%.

Issuing an unscheduled trading update on Wednesday, Ross McEwan, chief executive of RBS, said the move was part of a continued clean-up of the bank, which was bailed out by the government in the aftermath of the 2008 financial crisis. The UK government still owns 73%.

“I am determined to put the issues of the past behind us, and make sure RBS is a stronger, safer bank. We will now continue to move further and faster in 2016 to clean-up the bank and improve our core businesses,” said McEwan.

“We’ve always been open about the scale of past issues facing RBS and although there is clearly much more to do, this announcement is a further step towards addressing legacy issues and building a great bank for our customers and delivering long term value for our shareholders,” he added.

RBS has now set aside £3.8bn to deal with RMBS litigation.

Powered by Guardian.co.ukThis article was written by Jill Treanor, for theguardian.com on Wednesday 27th January 2016 07.50 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010


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