l:erbs 13 December 2016 Andrew Tyrie MP Chairman of the Treasury Select Committee House of Commons, Committee Office 7 Millbank London SW1P 3JA

Transcription

1 Ross McEwan Chief Executive l:erbs 13 December 2016 Andrew Tyrie MP Chairman of the Treasury Select Committee House of Commons, Committee Office 7 Millbank London SW1P 3JA Gogarburn Edinburgh EH12 1HQ Telephone: Direct Line: Dear Andrew, Thank you for your letter of Monday 5 December. I note your comments in relation to our recent announcement of a new complaints process and refund of complex fees for small or medium-sized enterprise (SME) customers in RBS's Global Restructuring Group (GRG) during the period 2008 to I will take each of your points in turn and my response should be read in conjunction with the principles shaped and agreed with Sir William Blackburne that will govern the complaints process, and the customer journey document. These documents will be published on our website shortly and are enclosed for ease of reference. As you know, we deeply regret the mistakes we have made in the past when dealing with some of our SME customers in GRG. That is why we were clear in our apology to those who went through what was a difficult experience and did not receive the level of service and understanding that they should have done. It is particularly important to note the role of Sir William Blackburne, a retired High Court Judge, in the oversight and assurance of the complaints process. His role as independent third party ('ITP') provides the complaints process with an additional layer of transparency, robustness and independence. I fully recognise the need for clarity and transparency around both the voluntary fee review and the complaints process. We have worked closely with the FCA to ensure that, from the point of announcement, we have made detailed, frequently asked questions (or "FAQs") available to customers on our website, supplemented by further information. I can also confirm that we hope to make the first automatic refunds of complex fees before Christmas and to have that process completed in the first half of The Royal Bank of Scotland Group pie Registered in Scotland No Registered Office: 36 St Andrew Square Edinburgh EH2 2YB

2 l!rbs Addressing each of your questi"ons in turn: How will I has the scope of the new complaints review process be I been determined? The scope of the new complaints process is based on the definition of an SME that was included in the original s.166 Skilled Person Requirement Notice ('RN'). An SME customer is in scope of the RN if they meet all of the following criteria: a UK or Republic of Ireland SME customer who was in GRG during the period 2008 to This typically included customers with debt of between 1m and 20m. We have subsequently included any SME customers with debt above the 250,000 threshold. Customers are unlikely to be considered small or medium-sized if they were or are: an entity with listed securities or debt syndicated across a number of banks, registered offshore or with the majority of their shareholders offshore, private equity backed, a special purpose vehicle or a sizeable business based on financial metrics e.g. debt facilities and/or turnover higher than 20m. What is the expected timeline for the complaints process? We have set no fixed period for the new complaints process but expect it to be in place for a minimum of 12 months. We shall, of course, discuss with both the FCA and the ITP when it is appropriate to give notice to GRG customers that the complaint process will conclude. While we are some way from that happening, I can assure you that customers will be given adequate notice of any end date for bringing a complaint through this new process. What steps will be taken to ensure that complaints are handled in a timely manner, given the potential number of complaints, and deadlines adhered to? By publishing a granular customer journey, we intend to build on the learnings from previous schemes and provide more clarity to customers on the process. Our expectation is that only the most straightforward cases will be dealt with within 56 days, however, consistent with the FCA's Dispute Resolution: Complaints (DISP) handbook, we will, of course, keep customers advised on the progress of their complaint. From the point of announcement we have had a dedicated and well resourced team working towards ensuring that complaints are dealt with in a timely fashion. We shall closely monitor the process and the adequacy of resources on an on-going basis. However, given the context of the period under review, we expect to receive some very complex complaints from a period that stretches back up to 8 years. Our priority is to ensure a rigorous and thorough review of each and every complaint. The s.166 skilled independent person's report identified that inappropriate treatment ofsme customers by RBS arose, in part, from "communication that was poor and in some cases misleading". What processes are being adopted to overcome this and ensure that communication with complainants is timely and transparent? 2

3 IJRBS We recognise this concern. As outlined above, the process we have developed is robust and transparent, with independent oversight. We have, from the outset of the complaints process, sought to ensure that our communication to customers is straightforward, clear and transparent with good signposting to additional sources of information. Our website is designed to provide an easy to use source of information for relevant GRG customers and it is supported by a series of FAQs that are regularly updated. What assurances does RBS give to be forthcoming with information? What procedures and processes, if any, will be in place to ensure that the information will be provided in a timely fashion? We recognise that the building of the file of documents and information is a key step in the process. A great deal of care will be taken to ensure that a full file of relevant information is built for each complaint submitted through the new complaint process. As set out in step 4.3 of the customer journey document, the full case file will be locked down and provided in full to the ITP in the event of an appeal. Transfer is electronic and so it will be made available quickly. I am confident that this is a robust process and it will, of course, be under the independent oversight of a retired High Court Judge who, as set out in the principles, will review and confirm that the methods adopted in the complaints process are appropriate. How will RBS monitor fairness and consistency in decision making of the complaints process? To ensure consistency, all decisions will go to a small panel of senior bank representatives for discussion, calibration and ultimately agreement. In addition, as set out in the principles, the ITP will be able to review any files he chooses to satisfy himself that the process is and remains appropriate. This will enable thorough and robust assessments, including whether RBS is operating within the spirit of seeking fair outcomes for customers. It also extends to any changes that RBS may make to the complaints process during its lifetime. In addition to ITP oversight, the RBS Board will oversee the process. This includes the provision by the ITP of regular reports on his assurance and appeal findings, at least quarterly, to the Board of RBS and, separately, to the FCA. Where a business has gone into liquidation/administration, how will the RBS ensure that the money goes to those who have suffered loss and not the liquidators/administrators? I would like to emphasise that, if a business has gone into liquidation or administration, the bank will still deal with any complaint received from the customer involved (and, indeed, proactively refund complex fees.) The bank will review complaints from any interested parties, albeit the agreement of the relevant administrator or liquidator may be required to discuss certain issues and all payments due, including complex fees, would have to be made via the insolvency process. Administrators and liquidators are officers of the court, with strict duties to all creditors, so the bank would expect them to utilise the complaints process if they consider it appropriate to do so. 3

4 t l!rbs Where the bank itself is a creditor in the insolvency of a customer, it is appropriate for any refund of fees to be off-set against the outstanding debt (and where a company is in an insolvency process, set-off operates as a matter of law). However, all customers in scope of the review who believe their businesses suffered as a result of actions taken by GRG can, in addition to the fee refund, also use the new complaints process. Why will consequential loss claims not be overseen by the independent third party? What options will be available to address a consequential loss claim? As set out in the principles, if a customer accepts the decision made in the complaints process, the customer will be required to enter into a full and final settlement of any claims they may have against RBS in relation to the complaint or similar issues, with the exception of any claim for consequential loss. This decision was taken after much consideration by the bank and was based on the inherent complexity of some consequential loss claims. The inclusion of consequential loss claims would cause considerable practical issues and, most crucially, would be likely to lead to considerable delays in the complaints process. The ITP and the FCA concurred with the bank's view that such claims will be considered outside the complaints process. If a customer complains through the new process and the bank upholds their complaint, the bank will pay the customer all direct losses arising from that complaint. The customer will then be asked separately to submit any claim for consequential loss that they wish to pursue, which the bank will then consider. In those circumstances where the bank cannot reach agreement with customers on their consequential loss claims, customers will then be able to pursue their claims though the court process. I can assure you that it is the bank's intention that such cases will only be directed towards the courts as a last resort and not as a matter of course. Firms do not appear to have access to the independent reviewer- why not? We have worked hard with the input of the FCA and ITP to develop a robust methodology and approach. This is a summary process and it is therefore expected that the file provided by the bank and the evidence provided by the customer in written form will, in most circumstances, be sufficient. The ITP does, however, have the ability to ask a customer to provide evidence or arguments in person where he considers it necessary. Why do firms not have access to the documents to which RBS and the independent reviewer have access? As outlined above, this is intended to be a summary process and does not carry with it the full disclosure requirement of formal legal proceedings. Following receipt of a complaint, we will review the bank's records together with any additional information that the customer sends us. If the customer requests us to do so, we shall also provide further copies of any documents that we have on file that have previously been issued to the customer (e.g. copies of previous correspondence between the bank and the customer). 4

5 i:trbs Does use of the new complaints review process, including the appeals process, constitute - or purport to constitute - waiver of litigation rights? As set out in the principles, if a customer accepts the decision made in the RBS Complaints Process, the customer will be required to enter into a full and final settlement of any claims they may have against RBS in relation to the complaint or similar issues with the exception of any claim for consequential loss. As a result, a customer would only be required to waive litigation rights once we have reached agreement. Should a customer opt not to accept the bank's (and, where the customer chooses to appeal, the ITP's) findings or proposed award then they would be free to pursue any other avenue of potential recourse available to them, whether through FOS or the courts. The RBS GRG Action Group called on the bank to pay out at least 2bn to SO affected businesses. Is 400m an underestimation? It is important to note that the FCA update made clear that, in a significant majority of cases, it is highly unlikely that businesses suffered material financial distress as a result of the bank's actions. The automatic fee refund is not a compensation scheme for customers who believe GRG caused their businesses to fail. Complex fees are being refunded because we believe there is a likelihood that they were not properly communicated or explained clearly enough, not because the fees themselves were necessarily wrongly charged. The bank has carried out careful analysis and as a result has estimated the costs associated with the new complaints review process and the automatic refund of complex fees to be approximately 400m, to be provided for in Q This includes the operational costs of both the fee refund and the new complaints process, together with the refund of complex fees including a payment to compensate for interest paid and additional estimated redress costs arising from the new complaints process. That said, if we need to revise this estimate we shall do so in a timely and appropriate way. As I have previously made clear, we made mistakes in the past, at a time when customers were already going through a traumatic and painful experience. I am confident, however, that the two steps we have taken, with the agreement of the FCA, address these mistakes and provide customers with an opportunity to raise a complaint on any aspect of their treatment whilst in GRG, confident in the fact that this process is and will be overseen by the ITP. I would be happy for any members of the Committee to spend time with the complaints handling team and would be delighted to arrange that if this would be of assistance. 5

6 l!rbs I have copied this letter to Andrew Bailey, CEO - Financial Conduct Authority, and to Sir William Blackburne. We may also share some of the content with other MPs who have expressed an interest in this matter. Yours sincerely Ross McEwan 6