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State-backed bank RBS said today it could not reliably estimate total liabilities for PPI sales although they could be 'material'.
The announcement comes the day after Lloyds said it had made a provision of £3.2bn for PPI claims, double analysts' estimates, leading to a fall in UK bank shares.
RBS said it continues to settle claims where it believe the customer has not been treated fairly or has suffered some detriment.
"However, a decision on appeal of the court case, led by the BBA, has not yet been made as it relates to important other issues of retrospective regulation," it said.
"The uncertainties around the outcome of the PPI action mean that, at this time, the Group is unable reliably to estimate any potential financial liability, although it could prove to be material."
RBS saw its losses widen in Q1 to £528m, compared with losses of £248m in the same period last year.
This included a charge of £469m from a market valuation of credit insurance provided to RBS by taxpayers under the Asset Protection Scheme. It also revealed an impairment charge of £1.3bn in relation to Ulster Bank.
However, operating profits were up almost £1bn to £1.05bn compared to Q4 2010. Its insurance arm, which RBS is committed to disposing, also returned to profit.
RBS reported it exceeded its business lending targets for the March 2010 to February 2011 Lending Commitments period, with gross new facilities totalling £56.9bn extended to UK businesses during the period, £6.9bn above target. Net mortgage lending was £1.4bn above target at £9.4bn.
The results come after the Treasury Select Committee (TSC) said yesterday it has commissioned an independent review of the FSA's report into the collapse of RBS. It wants to scrutinise why the regulator failed to spot problems at the bank.
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There are wider issues here.
The PPI issue again reflects poorly on our woebegone Regulator. Why didn’t they spot this earlier? They have made hay out of this, but it is only really the tip of the iceberg as we all know how the banks have ripped off their customers for years. They operate a cartel which the MMC does nothing about. They will now seek to repair the damage of PPI by hitting customers with ever higher fees and interest charges. Over 20% for credit cards and if you want an overdraft 14% is par for the course. I hardly need point out that this is 28 times base rate. (That is if you can get one and are not waltzed into a fixed loan). You really don’t have to be that old to remember that 2% above base was considered a bit over the top. Irrespective of which bank you approach the usurious rates are pretty similar. Where is all the brave talk from the now practically moribund Giro, Metro Bank, Virgin, Tesco and Sainsbury’s? (These last two are not really banks at all but white labels of the usual suspects). We have a regulator who is roundly disparaged from every sector in which it operates, unloved equally by those it regulates and those whom it allegedly is there to protect. It is to be hoped that the new (confusingly named) FCA will be more than just a change of nameplate and that there will be a root and branch change to personnel, systems, attitudes and functionality. (A vain hope?) I also hope that the core and most essential element of regulation is restored – a mutual respect between the regulated, the Regulator and those whom it seeks to protect. That in my view should be the starting point, together with a serious attempt to break the monopolistic practices of our banks. It should at last be recognised that a retail bank is above all a utility. Then perhaps regulation can concentrate on where potential risk is greatest and stop fiddling with what to a large extent are irrelevancies (the constant changes to Key Facts documents, the micromanagement of the small business sector as mere examples). Fining large firms does nothing (except enlarge your bonus pool). Lesser absolute numbers but levied on individuals would surely be much more effective. And finally and perhaps most importantly a regulator should be fully accountable.
Posted by: Harry Katz