RBS setting aside £400m for rate rigging fines

The Royal Bank of Scotland headquarters at Gogarburn. Pic: Phil Wilkinson
The Royal Bank of Scotland headquarters at Gogarburn. Pic: Phil Wilkinson
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Royal Bank of Scotland today announced it was setting aside £400 million to settle foreign exchange rate rigging allegations.

The Edinburgh-based bank revealed the move as it published its latest results, showing a £1.27 billion profit for the third quarter of the year.

RBS, which is 80 per cent owned by the taxpayer after being rescued during the financial crisis, is the second UK bank to put aside hundreds of millions of pounds for expected fines related to currency rigging.

Rival Barclays said yesterday it was making a £500m provision as it finalised talks with global regulators over the scandal.

RBS said it was also putting aside a further £100m to cover compensation payouts for customers mis-sold payment protection insurance (PPI), taking its total bill for PPI to £3.3 billion.

The bank said: “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 £1.27bn profits compare with a loss of £634m in the same period last year. It is the first time the bank has reported a profit for three quarters in a row since the financial crisis in which the bank nearly collapsed.

RBS also confirmed that following a strategic review it would retain Ulster Bank.

Chief executive Ross McEwan said: “We have confirmed today that Ulster Bank remains a core part of our bank. We have a good market position and believe that, with investment, Ulster Bank can deliver attractive shareholder returns in the future.”

RBS and Barclays are among six banks reportedly in discussions to reach a settlement on the foreign exchange (forex) scandal before the end of the year. The others are HSBC, Citigroup, JP Morgan Chase and UBS.

Switzerland’s UBS earlier this week said it had set aside a provision of £1.2bn which would include litigation and regulatory issues.

America’s Citigroup last night said it was taking a £375m hit due to “rapidly evolving regulatory inquiries and investigations, including very recent communications with certain regulatory agencies”.

Britain’s Financial Conduct Authority (FCA) and Serious Fraud Office (SFO) are among the bodies around the world investigating the alleged manipulation of the £3 trillion-a-day forex market.

A fine for RBS for forex rigging would come after it last year paid £391m to US and UK regulators for rigging the benchmark interbank lending rate, Libor. It also had to pay £325m to European regulators for similar allegations.

Mr McEwan said performance in the UK and Ireland was “showing signs of growth”.

But he added: “We know we still have a long list of conduct and litigation issues to deal with.”