The U.K. Financial Services Authority on Tuesday said it fined Royal Bank of Scotland Group PLC (RBS) and its National Westminster Bank PLC (NWBD.LN) unit a total of GBP2.8 million due to "multiple failings" in the way they handled customers' complaints.

The industry regulator said the banks responded inadequately to more than half the complaints reviewed by the FSA, and that "there was an unacceptably high risk that customers may not have been treated fairly due to a number of failings within the banks' approach to routine complaint handling."

The fine comes as RBS, which became 84%-owned by taxpayers after a huge government bailout, is coming under heavy scrutiny over reported plans to award Chief Executive Stephen Hester with a GBP2.5 million bonus for 2010 and to give a separate GBP950 million in bonuses to senior staff.

Margaret Cole, the FSA's managing director of enforcement and financial crime, said: "The failure of these two high-street banks to deal adequately with complaints put consumers at unacceptable risk and the fine of GBP2.8 million reflects this."

"The poor complaints procedure of RBS and NatWest came to light during our review of complaint handling in major banks. The review showed that banks need to make major changes to handle consumer complaints fairly and the FSA will continue to take appropriate action to ensure these changes are put in place," Cole said.

Brian Hartzer, CEO of RBS' U.K. retail operations said: "We acknowledge the findings of the FSA investigation. It confirmed short comings in our routine complaint-handling that we assessed in our own internal review and which we are committed to putting right."

"We recognize the importance of complaint-handling for our customers and are focussed on addressing the root causes of complaints," Hartzer said.

The FSA said that the fine against RBS and NatWest was due in part to delays in responding to customers, poor-quality investigations into complaints, failing to fully address all of the concerns raised by customers and failing to explain why complaints had been upheld or rejected.

Of the complaint files reviewed by the FSA, 53% showed deficient complaint-handling, 62% showed a failure to comply with FSA requirements on timeliness and the disclosure of Ombudsman referral rights, and 31% failed to show fair outcomes for consumers. The FSA didn't give the total number of complaints.

The FSA said RBS and NatWest also didn't give complaint-handling staff adequate training and guidance on how to properly investigate a complaint.

At 1051 GMT GMT, RBS shares were up 1.2% at 40 pence while the FTSE 100 index was up 1%.

-By Vladimir Guevarra, Dow Jones Newswires. Tel. +44 (0) 2078429486, vladimir.guevarra@dowjones.com
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