RBS to consider appeals for indirect losses to businesses in turnaround unit

By Emma Rumney and Lawrence White

LONDON (Reuters) - Royal Bank of Scotland will set up a process to consider appeals for alleged "consequential" losses suffered by businesses in its Global Restructuring Group (GRG), potentially opening the bank up to large claims for lost profits.

The bank spelled out the change to the appeal process for companies allegedly harmed by its GRG unit in a letter to British junior finance minister John Glen seen by Reuters on Thursday.

That followed criticism from politicians and former RBS business customers about how it was handling complaints about the GRG unit, which is alleged to have pushed customers into bankruptcy during and after the 2007-8 financial crisis.

The widening of the appeal process shows RBS still grappling to deal with past misconduct issues on the same day it reached a $5 billion settlement with U.S. authorities over its sale of mortgage bonds.

RBS has already accepted some wrongdoing and set aside 400 million pounds ($539.08 million) to compensate firms in its GRG unit, and appointed a former high court judge Sir William Blackburne to oversee appeals by customers not happy with their payouts.

Consequential losses represent loss of potential profits as a result of a business being closed down.

Ex-GRG customers can already claim for loss of potential profits, but if their claims were rejected there was no way to appeal to an independent third party, unlike the compensation scheme for direct losses.

The letter said the bank had only received one such claim so far, but expected it could face some very large claims once the claims process gets further underway.

The letter also said RBS hoped to finalise in the next few weeks with the independent third party Blackburne, how the process should work and whether he will take on the role of hearing consequential loss appeals.

As well as covering reasonable costs for customers' initial meetings with professional loss advisors, the letter said RBS would ensure it does not profit from any redress paid to former customers that have since gone into liquidation.

Compensation paid to now-defunct companies could pass to RBS, due to the bank being a creditor of the former businesses. In such cases the funds will be donated to charity, according to the letter.

A spokesman for RBS confirmed the new policy.

($1 = 0.7420 pounds)

(Reporting By Emma Rumney and Lawrence White; Editing by Alexandra Hudson and Jane Merriman)