100,000 people in line to receive compensation

More than 100,000 people caught up in the Ulster Bank crisis could be in line for compensation once the scandal is resolved.

Financial Services Ombudsman Bill Prasifka confirmed the move may be on the cards as the banking furore reached its one-week watershed today.

Mr Prasifka told the Irish Examiner his office would examine any complaints it received and, if necessary, award compensation.

In a shot across the bows of Ulster Bank and the Royal Bank of Scotland Group of which it is a subsidiary, Mr Prasifka said the institution should deal directly with customers’ concerns before he is forced to intervene in settling the likely disputes.

“We examine complaints on a case-by-case basis. If someone is put out by a bank or insurance company’s maladministration we routinely recommend the ex-gratia payments to the injured party,” he said.

“We are not a body set up to levy penalties. We were established to award compensation.”

Conservative estimates in Britain put the cost to Ulster Bank’s parent firm at over €100m. This is based on Shore Capital Stockbrokers estimating that even if only 1% of the companies affected were to claim €620 (£500) in compensation, as allowed, the bank would have to foot a bill of more than €105m.

Coupled with the potential smaller compensation to a large section of ordinary customers due to stress, lack of cash, interest, or missed payments, Shore Capital said the total cost could run into the “hundreds of millions”.

In an email to clients yesterday, seen by business news wire Bloomberg, RBS said canceling fees and paying employees for working extra hours may cost tens of millions of pounds, while compensation claims could push the total even higher.

Meanwhile, politicians, including Jobs Minister Richard Bruton and Labour senator Lorraine Higgins, have called on banking charges to be absolved for the length of time it takes to resolve the difficulties facing customers.

Ms Higgins went further than most, arguing that the bank “should agree to forgo any charges until Jan 2012” as “a small gesture” that would “have a real impact on the lives of their customers”.

RBS Group chief executive Stephen Hester has again apologised for what happened in Britain and Ireland, and said senior management would face “proper accountability” when it came to the next round of bonuses in the firm.

However, he rejected claims that the IT problems were added to by an outsourcing of experts in the field to India last year, and brushed aside questions on Sky News over his future at the firm.

“I think the most important thing I or anyone else can do at RBS is to put this thing right. There is plenty of time afterwards to say why did this happen, how do we stop this happening, and what’s the accountability,” he said.