NatWest to examine Irish unit over alleged mishandling of small business loans by Ulster Bank

NatWest has told UK regulators it will examine the treatment of a number of business customers in Northern Ireland whose loans are the subject of allegations they were mishandled by Ulster Bank during the financial crisis, two people familiar with the situation have said.

The UK bank recently told the Financial Conduct Authority (FCA) that it will begin a “remediation programme” of the treatment of customers at its Irish unit who allege wrongdoing, the people said.

One of the two said work on the issue is at an early stage, would involve a “small number of customer cases to provide further assurance that no customer detriment has occurred and that all customers with [fixed-rate loans] have been treated consistently”.

The bank has not yet discussed its parameters with the FCA, that person said, adding that there are no plans to contact any affected customers at this point.

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NatWest has strongly denied any claims of wrongdoing on the fixed-rate loans.

The issue centres on interest rate hedging products that were allegedly attached in 2008 by Ulster Bank, a subsidiary of NatWest that operated across the island of Ireland until April this year, to the fixed-rate loans for small and medium-sized businesses without customers’ knowledge.

NatWest, whose former chief executive Alison Rose resigned in July after admitting she disclosed information about a customer to a reporter, has been publicly accused by a former senior executive of hurting the customers by attaching hidden liabilities to their fixed-rate loans.

[ NatWest board criticises chief Alison Rose for ‘serious error’ in ‘de-banking’ of Farage ]

Those customers were later forced into NatWest’s Global Restructuring Group, a division that has been heavily criticised by regulators, with an independent review finding “widespread and systemic” problems.

Ian Tyler, former group head of capital at the Royal Bank of Scotland (RBS) – as NatWest was previously known – told the Financial Times (FT) that clients were issued with a facility letter that detailed the fixed-rate loan they signed up to as well as an interest rate swap they did not. The interest rate swap disadvantaged the customers when rates fell. Tyler left RBS in 2008. The issue was first reported by the Times.

Ian Paisley Jr, an MP from Northern Ireland’s Democratic Unionist Party who said he had been contacted by a number of people alleging to have been affected, said legislators at Westminster were “about to set up” a short-term, cross-party parliamentary group which would write to the FCA and the treasury.

He told the FT the aim was for the FCA “to do its job and give these customers resolution”. An initial meeting was held last week to agree parameters and he expected the group to be functioning and to have published the letter in the next three weeks.

Ulster Bank appeared to have used some “interesting financial arrangements and practices which should have been examined”, Mr Paisley said.

Stephen Farry, an MP for Northern Ireland’s Alliance Party, said: “These allegations are very troubling. I first raised this issue with the FCA last December. I have subsequently sought a further response from the FCA, and also written to government ministers and tabled a parliamentary question.”

The FCA said it was “aware of and... considering the concerns raised; however there are legal restrictions which prevent us commenting on specific firms”.

“The bank has thoroughly investigated the allegations that have been made over the last 12 months in relation to historical sales of fixed-rate loans to customers in Northern Ireland,” NatWest said.

“This voluntary review has found no evidence of customer detriment and we are in discussions with the FCA about what, if any, further assurances we can provide.” – Copyright the Financial Times Limited 2023