Royal Bank of Scotland under fire over dormant accounts
Anti-money laundering, the more we neglect, the more we regret,
Due to IT glitch, bank originally told 4,500 customers they did not hold accounts
Royal Bank of Scotland has become embroiled in another scandal after admitting that it was wrong to deny sitting on almost quarter of a million pounds of customer money. The troubled lender said it had now agreed to return cash to as many as 4,500 customers after apologising to them for the mistake.
The controversy is a major blow to chief executive Ross McEwan, who has promised to return customer trust to the largely state-owned bank after a series of mis-selling scandals following on from a financial bailout in 2008.
RBS blamed the latest setback to faulty computer settings established to identify the owners of dormant accounts. “Unfortunately, we wrongly advised some customers who had made a request ... that they did not hold a dormant account with us,” said an RBS spokesperson. “We are very sorry that this happened, and as soon as we discovered this, we took steps to correct our error. We are writing to all affected customers and asking them to visit their local branch with ID to reclaim their outstanding balance.”
Following a wider outcry about the amount of money being held in inactive accounts by many different lenders, a free website, Mylostaccount.org.uk, was established in 2008 by the British Bankers’ Association (BBA). RBS is now under threat of an investigation by the Financial Conduct Authority into how its software gave erroneous information to those trying to access money via the Mylostaccount website.
It is not the first time the lender, which is still 74% owned by the taxpayer, has been hit by IT glitches, with 600,000 transactions being delayed five months ago as a result of computer failures. The company was also fined £56m last year for IT difficulties that locked customers out of their accounts. But these issues are small compared to penalties for rigging the foreign exchange markets and mis-selling scandals which have battered the bank’s balance sheet.
RBS has set aside almost £2bn as it awaits to hear the scale of the fine to be imposed on it and others over its sale of mortgage-backed securities that some critics say played a significant role in the wider financial collapse seven years ago.
Credit agencies have warned that the scale of fines on RBS and the wider finance industry are hard to quantify. “Most US and European global investment banks have set aside large provisions for future litigation costs,” said Moody’s. “However, the complexity, uncertainty and the escalating nature of these costs present tail risk that is difficult to quantify in any stress test.”
The RBS share price has been badly hit by the ongoing problems and is 20% below the level at which it started 2015