RBS to take a £300million-plus hit for its IT meltdown and two mis-selling scandals

THE ROYAL BANK OF SCOTLAND is to take a £300million-plus hit for its IT meltdown and two mis-selling scandals, it said yesterday.

Customers at the part state-owned bank suffered two weeks of disruption in June following the catastrophic failure of a software upgrade.

RBS has set aside £125million to compensate them, but warned the final figure could be far higher.

Boss Stephen Hester confessed banks had hit “new lows” as he revealed the payouts yesterday.

RBS, 82 per cent-owned by the taxpayer, has also set aside £135million to compensate customers mis-sold payment protection insurance (PPI). It takes their total PPI bill to £1.3billion.

And the bank, owner of NatWest, will pay out up to £50million to cover claims from small businesses mis-sold specialist insurance, known as interest rate swaps. It brings the total expected compo bill announced yesterday to £310million.

Mr Hester said there was “some way still to go” in correcting past errors — but revealed no one has yet been fired for the IT gaffe, which crippled online banking, cut services at many branches, and saw some customers make double loan payments.

Mr Hester said: “We are in a chastening period for the banking industry. The consequences of the sector’s past over-expansion are still being accounted for, probably with some way still to go.

“The mistakes and vulnerabilities carried over from that period are both financial and cultural. The consequences of these mistakes have seen the reputation of the sector fall to new lows.”

He added that the banking industry “became a bit detached from society and it is coming down to earth with a bump”.

RBS yesterday confirmed staff WERE fired over the fixing of Libor, the rate at which banks lend to each other.

It did not say how many. The bank reported a half-year loss of £1.5billion yesterday, against a £794million loss a year earlier. Revenues for the first six months of the year fell eight per cent to £13.2billion.

Asked about reports that RBS could be fully nationalised, Mr Hester said: “That’s not a discussion we’re part of.”

- TESCO is to offer mortgages from next week — with Clubcard points for monthly payments.

Rates start at 3.19 per cent through the supermarket’s banking arm, and borrowers will collect one Tesco Clubcard point for every £4 they repay each month.

Tesco will be the only one of the big four supermarkets offering mortgages. SAINSBURY’S pulled out of the market in 2004.

Tesco bank chief Benny Higgins said: “This is a long-term strategy. Our mortgages are for generations to come.”

- THE owner of BRITISH AIRWAYS warned yesterday its Spanish operation was facing job cuts. INTERNATIONAL AIRLINES GROUP said IBERIA had suffered losses of £207million and will be “restructured”. BA did “reasonably well” with an operating profit of £10.2million and was not facing redundancies.

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