RBS's Coutts Sets Aside Funds for Customer Compensation

By Max Colchester 

LONDON-- Royal Bank of Scotland Group PLC's Coutts & Co has put aside GBP110 million ($182.46 million) to cover potential payouts to U.K. customers who may have been sold unsuitable investments.

The 300 year-old private bank, which is part of RBS's wealth arm, is undertaking a review of thousands of products that may have been wrongfully sold to high net worth clients. In 2013 RBS took provisions of over GBP206 million to cover issues in its private banking division. On Friday it disclosed that GBP110 of that would be aimed at its Coutts clients. The bank has started writing to around 15,000 clients potentially affected.

The news comes as RBS considers the future shape of Coutts. RBS is considering selling the international arm of the unit, as it looks to place its private banking activities alongside its U.K. commercial unit. The 80% U.K. state-controlled bank said it would be tough for the international unit to hit a profitability target of 15% return on equity "given the dynamics of compressed margins and the increasing need for scale in international businesses."

Coutts has been the source of regulatory headaches for RBS in the past. In 2010 the U.K. regulator fined RBS GBP5.6 million for not keeping adequate controls to prevent breaches of money-laundering rules at several units including Coutts.

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