NatWest Markets Plc

On 11 January 2011 the FSA imposed a financial penalty of £2,800,000 on Royal Bank of Scotland Plc and National Westminster Bank Plc (together, the Firms) for breaches of Principle 3 (management and control) and Principle 6 (customers' interests) of the FSA's Principles for Businesses and Rules in the Dispute Resolution: Complaints Sourcebook (DISP) which occurred between 1 December 2008 and 25 March 2010 (the Relevant Period). The Firms agreed to settle at an early stage of the FSA's investigation. They therefore qualified for a 30% (stage 1) reduction in penalty, pursuant to the FSA's executive settlement procedures. Were it not for this discount, the FSA would have imposed a financial penalty of £4,000,000 on the Firms. During the Relevant Period, the Firms' complaint handling arrangements for their UK Retail bank branch network (RBS UK Retail) and for dealing with escalated complaints arising from the branch network breached the FSA's Principles and Rules. In particular, the FSA has identified the following failings: 1) the monitoring undertaken at branch level and the resulting management information produced was ineffective in assessing whether customers were being treated fairly. It focused on whether complaint handlers adhered to process and did not assess the quality of customer outcomes. For example, the controls focused on measuring whether complaint handlers dealt with complaints within target timeframes and did not assess the quality of the investigation performed, the correspondence produced or the overall outcome for the complainant; 2) RBS UK Retail failed to ensure that complaint handlers properly reviewed complaints taking account of all relevant factors. For example, the FSA's review of complaint handling arrangements within RBS UK Retail (the Thematic Review) found: a) the quality of the investigation undertaken was inadequate with complaint handlers failing to obtain all relevant and reasonably available information when investigating a complaint; b) the guidance provided to staff on how to investigate properly a complaint was limited. It provided a high level overview of complaint handling with an emphasis on resolving complaints within target timeframes; c) there was no formal requirement to consider and feed back the results from FOS decisions to complaint handlers and/or teams outside of the dedicated FOS team. As a result, complaint handlers, with the exception of the specialist FOS Team, were not always aware of and did not always take account of FOS decisions when deciding complaints; and d) the complaint handling process applied led to delays in sending out responses to customers, multiple attempts to resolve the complaints with customers and led to delays in customers receiving details of their FOS referral rights. 3) RBS UK Retail failed to ensure that correspondence sent to complainants addressed fully all concerns raised by the customer and set out the outcome of the investigation in a way that was fair, clear and not misleading. RBS UK Retail's breaches are viewed as serious because: 1) RBS UK Retail is the second largest provider of retail banking products and services in the United Kingdom with approximately 2,200 bank branches and 15 million customers during the Relevant Period. The majority of consumers make complaints through the branch network, which, as the first point of contact, in most cases retained responsibility for resolving any complaint received. Therefore, given the nature of the failings there is an unacceptably high risk that customers may not have been treated fairly; and 2) the ability of RBS UK Retail to effectively monitor and assess its complaint handling arrangements was impacted for around two and a half years. RBS UK Retail was aware from Quarter 2 2007 that complaint handlers were failing to attach on the complaint handling management system the mandatory acknowledgment and resolution letters. This was not ful resolved until November 2009. RBS UK Retail's failures therefore merit the imposition of a significant financial penalty. In deciding the level of disciplinary sanction, the FSA recognises that RBS UK Retail has co-operated fully with the FSA throughout its investigation, accepting the findings of the Thematic Review at an early stage. The FSA also acknowledges that these issues were assessed during the Firms' Cross Divisional Review in Quarter 4 2009. RBS UK Retail has agreed to make significant changes to its complaint handling arrangements as a result of the findings from this review and the FSA's Thematic Review, and has already started to implement such changes. This has included: 1) proactively seeking to address and agree the issues identified by the FSA's thematic review at an early stage; 2) working with a skilled person to undertake an extensive review of all parts of its complaint handling arrangements; 3) increasing the types of complaints which are required to be handled by specialist complaint handlers so more complaints are now owned by specialist areas; and 4) undertaking a re-assessment of a number of complaint files. The FSA expects that these changes will lead to improved outcomes for customers.