REG - NatWest Group plc - Key findings from Phase 1 of Travers Smith review

NatwestAnnouncement

27/10/2023 07:00

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RNS Number : 5310R  NatWest Group plc  27 October 2023

NatWest Group plc

27 October 2023

Key findings from Phase 1 of Travers Smith review

NatWest Group has today published the key findings and recommendations from
Phase I of the Travers Smith independent review - commissioned by the Board in
July - covering the decision to close the Coutts accounts of Mr Farage (Review
1) and the circumstances surrounding a potential breach of confidentiality
relating to his customer information (Review 2).

The key findings and recommendations report ("the report") published today was
compiled by Travers Smith. It is compliant with NatWest Group's legal
obligations, including customer confidentiality and data protection laws. The
report confirms that the exit decision was lawful and was made in accordance
with the relevant bank policies and processes, but also identifies a number of
shortcomings in how the decision was reached, how the bank communicated with
Mr Farage and how it treated his confidential information.

NatWest Group has accepted - and will implement - all of the recommendations
made by Travers Smith. Alongside the report, the bank will make a number of
other changes to its policies and procedures designed to deliver better
outcomes for its customers and to ensure that the lawfully protected beliefs
or opinions of customers do not play any role in exit, retention or onboarding
decisions.

The Board is considering these findings and deciding on appropriate outcomes.
As we would with any other employee, we have a duty of confidentiality to Dame
Alison Rose. However, given her role as the former CEO of NatWest Group, there
is a disclosure obligation in relation to her remuneration. The bank will
disclose the relevant outcomes, as soon as possible.

Separately, the Financial Conduct Authority has confirmed that it is
conducting supervisory work, covering both NatWest Group and Coutts, into how
the firms' governance, systems and controls are working, to identify and
address any significant shortcomings.

Commenting on NatWest Group's response to the report, NatWest Group Chairman,
Sir Howard Davies, said:

"This report sets out a number of serious failings in the treatment of Mr
Farage. Although Travers Smith confirm the lawful basis for the exit decision,
the findings set out clear shortcomings in how it was reached as well as
failures in how we communicated with him and in relation to client
confidentiality. We apologise once again to Mr Farage for how he has been
treated. His experience fell short of the standards that any customer should
expect.

"Our job now is to make sure that does not happen again. The bank is committed
to implementing all the recommendations made by Travers Smith and we are
making substantive changes to our policies and procedures, in particular to
ensure that the lawfully protected beliefs or opinions of customers do not
play any role in our decision making.

"The Board is considering the findings and deciding on the appropriate
outcomes on other matters. It is important we have regard to all necessary
processes and due consideration of issues including the bank's obligations
around privacy and confidentiality."

The report
(https://www.natwest.com/content/dam/natwestgroup_com/natwestgroup/pdfs/PDFs/231027-Final-TS-long-summary-publication-version.pdf)
sets out Travers Smith's key findings and recommendations in full. These
findings relate to the facts, and compliance with laws and regulations by the
NatWest Group (and not any individuals).

In summary, they include:

Review 1 - External review of the decision to close the accounts of Mr Farage

•        The exit decision was taken at a Wealth Reputational Risk
Committee meeting in November 2022. The former NatWest Group CEO, Alison Rose,
played no part in that decision.

•        The exit decision was lawful. It did not amount to a direct
or indirect breach of applicable laws and was made in accordance with the
relevant bank policies and processes.

•        On balance, the exit decision was predominantly a commercial
decision. Coutts considered its relationship with Mr Farage to be commercially
unviable because it was significantly loss-making.

•        The Coutts Eligibility Criteria were not a relevant factor
in the exit decision.

•        There were other factors considered as part of the
decision-making process. Foremost among those other factors was the risk
Coutts perceived to its reputation in the eyes of its stakeholders. But these
were not, in Travers Smith's view, factors that drove the exit decision.

•        Mr Farage's public statements on various issues were not a
determining factor in the exit decision. Rather, Travers Smith consider them
to have supported the decision.

•        Coutts had a contractual right to close Mr Farage's account
and the decision was made in accordance with relevant bank policies and
processes.

•        The way the exit decision was communicated to Mr Farage was
not in accordance with the bank's policies and processes, in particular giving
reasons to customers in non-financial crime exits. No adequate reasons were
given.

•        Coutts did not comply with the FCA's Dispute Resolution:
Complaints sourcebook, in part because no complaint was logged for several
months after it was made.

•        The decision taken in May 2022 to continue to classify Mr
Farage as a PEP was incorrect. However, if he was to have been declassified as
a PEP, he would have been re-categorised as a non-PEP with a risk profile of
"high", with broadly the same screening requirements.

Review 2 - Review the circumstances surrounding the BBC article and if any
leak of confidential customer information or breach of GDPR occurred.

•        Confidential customer information concerning Mr Farage was
conveyed, whether expressly or impliedly, from Alison Rose to the BBC on 3
July 2023 and / or 4 July 2023.

•        Her disclosures probably amounted to a Personal Data Breach
for the purposes of GDPR. They might also amount to a regulatory breach by
members of the NatWest Group, but this is a matter for the regulator to
decide.

•        At the time of her disclosures to the BBC, Alison Rose had
not seen the contents of the first data subject access request provided to the
client in July 2023.

•        Whilst Travers Smith made certain observations about the
risks she should have appreciated in making the disclosures to the BBC, their
opinion is that, in doing so, she did not consciously set out inappropriately
to disclose the relevant information.

•        There was no leak of Mr Farage's specific detailed financial
information (such as account balances).

•        There was no evidence of any other relevant leaks of
customer confidential information from NatWest Group.

•        NatWest Group's response to the possibility that
confidential information had left the organisation did not breach any relevant
regulatory obligations.

Additional conclusions

•        Coutts failed to pay due regard to the interests of Mr
Farage and failed to treat him fairly in the round because of the failings
across Coutts and NatWest Group set out in Travers Smith's two reports. This
might also amount to a regulatory breach, but is a matter for the relevant
regulator to decide.

In light of both the recommendations made by Travers Smith and its own
internal work, NatWest Group is taking a number of steps to deliver better
outcomes for customers across the bank. These include:

•        Taking immediate steps to ensure that the lawfully protected
beliefs or opinions of customers do not play any role in exit, retention or
onboarding decisions. This includes a review of how reputational risks are
considered and the role of reputational risk committees within this process.

•        A wider review of how exit decisions are made and
communicated across the Group. This includes greater consistency in providing
customers with a reason for exit where appropriate and formalising a process
to consider the offer of alternative banking arrangements elsewhere in the
Group where a client is exited for commercial reasons.

•        In appropriate circumstances, ensuring conversations take
place with Coutts clients when exit decisions are being considered for
commercial reasons so that clients are given the opportunity to increase their
business with the bank.

•        Undertaking more regular reviews of PEP status to ensure
that individuals are classified as PEPs only where it is necessary to do so
and for no longer than necessary.

•        Enhanced training and guidance for staff in relation to exit
decisions, complaint handling, client confidentiality and banking secrecy, as
well as formalising the process for leak enquiries.

In completing Phase I, Travers Smith requested, and were granted, access to
approximately 3.7 million documents, including emails and other
communications, and conducted 43 interviews with 28 current and former members
of staff from NatWest Group.

Phase II of the Review, covering a wider sample of Coutts' account closures of
the last 24 months, is ongoing and the findings are due to be received by the
Board later this year. A report summarising the key findings and
recommendations, along with any additional actions to be taken by the bank
will be published in due course.

 

For more information, please contact:

NatWest Group Investor Relations

Alexander Holcroft

Head of Investor Relations

+44 20 7672 1758

 

NatWest Group Media Relations

+44(0)131 523 4205

 

Legal Entity Identifier:  2138005O9XJIJN4JPN90

 

Forward-looking statements

This document may include forward-looking statements within the meaning of the
United States Private Securities Litigation Reform Act of 1995, such as
statements that include, without limitation, the words 'expect', 'estimate',
'project', 'anticipate', 'commit', 'believe', 'should', 'intend', 'will',
'plan', 'could', 'probability', 'risk', 'Value-at-Risk (VaR)', 'target',
'goal', 'objective', 'may', 'endeavour', 'outlook', 'optimistic', 'prospects'
and similar expressions or variations on these expressions. These statements
concern or may affect future matters, such as the implementation of the
recommendations included in the Travers Smith review (including any changes to
NatWest Group's policies and procedures), NatWest Group's future economic
results, business plans and strategies.  In particular, this document may
include forward-looking statements relating to NatWest Group plc in respect
of, but not limited to: its economic and political risks, its regulatory
capital position and related requirements, its financial position,
profitability and financial performance (including financial, capital, cost
savings and operational targets), the implementation of its purpose-led
strategy, its environmental, social and governance and climate related
targets, its access to adequate sources of liquidity and funding, increasing
competition from new incumbents and disruptive technologies, its exposure to
third party risks, its ongoing compliance with the UK ring-fencing regime and
ensuring operational continuity in resolution, its impairment losses and
credit exposures under certain specified scenarios, substantial regulation and
oversight, ongoing legal, regulatory and governmental actions and
investigations, the transition of LIBOR and IBOR rates to replacement risk
free rates and NatWest Group's exposure to operational risk, conduct risk,
cyber, data and IT risk, financial crime risk, key person risk and credit
rating risk. Forward-looking statements are subject to a number of risks and
uncertainties that might cause actual results and performance to differ
materially from any expected future results or performance expressed or
implied by the forward-looking statements. Factors that could cause or
contribute to differences in current expectations include, but are not limited
to, future growth initiatives (including acquisitions, joint ventures and
strategic partnerships), the outcome of legal, regulatory and governmental
actions and investigations, the level and extent of future impairments and
write-downs, legislative, political, fiscal and regulatory developments,
accounting standards, competitive conditions, technological developments,
interest and exchange rate fluctuations, general economic and political
conditions and the impact of climate-related risks and the transitioning to a
net zero economy. These and other factors, risks and uncertainties that may
impact any forward-looking statement or NatWest Group plc's actual results are
discussed in NatWest Group plc's 2022 Annual Report on Form 20-F, NatWest
Group plc's Interim Results for H1 2023 on Form 6-K, Natwest Group plc's
Interim Management Statement for Q1 and Q3 2023 on Form 6-K, and its other
public filings. The forward-looking statements contained in this document
speak only as of the date of this document and NatWest Group plc does not
assume or undertake any obligation or responsibility to update any of the
forward-looking statements contained in this document, whether as a result of
new information, future events or otherwise, except to the extent legally
required.

 

 

 

 

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