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RBS sets aside stg£28m for Ulster Bank tech 'glitch'

Interim results report clarifies the amount being earmarked for both redress for beleaguered Ulster Bank customers in Ireland and the costs associated with dealing with the system failure.

Image: Photocall Ireland

Updated 8.52am

AN INTERIM REPORT from the Royal Bank of Scotland has noted that the banking group will set aside stg£125m to deal with the fallout of its technical ‘glitch’. Most of this, the RBS says, is to provide “redress” for its customers  – and it specifies that stg£28m (€35.5m) is to be put aside to deal with the problems encountered by its Ulster Bank customers.

The Group Chief Executive, Stephen Hester, wrote a comment in the report which called the technical glitch which saw Ulster Bank and RBS customers without access to their own accounts for weeks “a significant blot”. He said that it was down to a “systems failure”:

While we have significantly increased technology spend over the past three years, there is clearly more we need to do to ensure reliability for our customers. I know our customers expect and deserve better and we are determined to learn the lessons of this incident and make the necessary improvements.

Later in the report, the banking group refers specifically to the problems that customers in Ulster Bank specifically encountered, long after RBS customers had their issues sorted:

Regrettably, in Ulster Bank, our customers experienced extended problems with their accounts, which have now been largely rectified.

It added that the bank was looking at a stg£125m bill to cover the costs of this incident “principally covering redress to the Group’s customers”. The full version of the report has a table that breaks down the cost of redressing the fallout of the glitch.

Of the £125m, £28m will go to covering the costs of sorting out the Ulster Bank customer problem (note that while much of this is said by RBS to be intended to go to customers, some will be used to cover the overtime and associated costs involved in sorting out the issue at the time). The rest is detailed here:

Otherwise, RBS said that its net losses were £466m in the second quarter and that this was a large drop from the same period last year. The net loss then was £897m.

The bank is also on alert in case it is hit by the Libor rate-rigging scandal which has wreaked havoc at British rival Barclays.

LIBOR fallout

“The LIBOR situation is on our agenda and is a stark reminder of the damage that individual wrongdoing and inadequate systems and controls can have in terms of financial and reputational impact,” RBS said on Friday.

“This is the subject of ongoing regulatory investigation but our customers and shareholders should be in no doubt that we are taking it seriously,” it added.

“These issues together are hard to deal with but just as necessary a part of change from the past as the restructuring of our balance sheet.”

The bank confirmed that several employees had been let go in the LIBOR “situation”.

The bank added that its half-year loss surged 40 percent to £1.99 billion following an accounting charge of £2.97 billion on changes to the value of its debt.

The bank’s underlying performance was rosier, showing a first-half operating profit of £1.8 billion “despite a worsening economic backdrop and the further restructuring,” said RBS chief executive Stephen Hester.

- additional reporting by AFP

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