RBS promises mortgage respite
1 Dec 08
The political and public campaign to force Britain's banks to do more to help customers weather the economic downturn will gain impetus today with a promise from the Royal Bank of Scotland to give at least six months' breathing space to homeowners who fall behind with mortgage payments.
The Financial Times reports that the promise, which will put pressure on other banks to make similar commitments, comes as ministers prepare to outline plans that could see voluntary codes of practice for the banking industry placed on a statutory footing.
The promise by RBS, which also owns NatWest, comes days after the government took ownership of a 58 per cent stake in the bank after shareholders shunned the offer to buy new shares as part of the bank's £20 billion capital injection.
The bank's pledge not to begin repossession proceedings until customers are six months or more in arrears is double the minimum recommended by industry guidelines. Writing in today's Financial Times, Stephen Hester, RBS's new chief executive, says banks recognise the role they have to play.
"We need to cut costs, to reduce our own borrowing and, yes, that means reducing some of our lending too," he writes.
"But along the way, we need to recognise our customers' needs and fulfil them where we can. Not because of any moral pressure - although we understand it - but because it makes commercial sense."
RBS said the guarantee would apply to all customers, including those already behind on their payments, and remain in place until at least the end of 2009.
Ministers are expected to welcome the move by RBS as an important first step.
But Downing Street and the Treasury are intent on pressing banks to do more as the economic outlook worsens. Based on feedback from more than 800 of its members, the EEF manufacturers' association today points to the drying up of bank finance as one of the main reasons why the outlook for 2009 is the worst for 20 years.
Alistair Darling, chancellor, told the Observer: "You know they [the banks] are getting something from the government. They have to realise that the taxpayer's going to get something in return."
Separately, Hector Sants, chief executive of the Financial Services Authority, has warned that banks will face more "intrusive" oversight as part of the City watchdog's plans to redevelop the role of its supervisors and add more staff to back them up.
In an interview with the FT, Mr Sants said supervisors would need to develop a far better understanding of the institutions they oversaw.
RBS and NatWest have about 7 per cent of the mortgage market, smaller than rivals such as Lloyds TSB and HBOS. The bank has also largely avoided lending to buy-to-let landlords and other borrowers at particular risk from a sharp drop in house prices.