Clydesdale combats City fears over loans legal claim
The Sunday Times, 16.07.2017
Scotland’s third largest bank has downplayed City fears that it will have to increase its provision for mis-sold business loans after a leading claims company announced plans to launch a multimillion-pound legal action against it.
Last week, claims management group RGL said it secured more than £2m from litigation funder Augusta Ventures to bring a claim against CYBG, owner of Clydesdale and Yorkshire banks, on behalf of thousands of small businesses. They insist they were mis-sold fixed-rate tailored business loans (TBLs).
CYBG’s interim results in May stated it held provisions of £92m (as of March 31, 2017) for “customer redress and other provisions”. This includes cash set aside for TBLs and interest rate hedging products.
One City analyst said: “The current provision is likely the low end of what may be claimed in any court action. In their last results CYBG noted that further provision could be required because it was unsure of the exact size of the potential liabilities.”
However, a spokeswoman for the bank insisted it had no plans to increase the amount set aside for potential TBL claims. It points out CYBG has been working to resolve claims on TBLs and had made “significant progress” in settling most of them.
She said: “The cost of this has been covered by existing provisions. We review our provision requirements on an ongoing basis . . . As no claim has been made by RGL management, there is no basis for evaluating it.”
She added that indemnity cover from the bank’s former parent company, National Australia Bank, also reduced its liability on legacy conduct issues and covered about around 90% of any claims.
RGL is expected to begin proceedings later this year. It believes more than 6,000 small businesses have grounds to join the action and estimates the value of the claims could run to “several hundred million pounds”.
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