RBS defiant in cash battle with Ireland

ROYAL Bank of Scotland has defied growing anxiety in the banking sector by revealing a sharp influx of savers in the past two weeks and the recruitment of 140 staff to cope with the increased business.

The bank issued figures aimed at countering fears that money is flowing out of UK institutions to the "safer haven" of Ireland, where the government last week guaranteed all banking deposits.

RBS said that together with sister bank NatWest it has seen a doubling in the number of savings accounts being opened, compared with the first two weeks of September. Individual Savings Account (ISA) openings have leapt by almost 250% over the period.

The latest figures add to RBS's claims revealed in Scotland on Sunday two weeks ago that it had seen "several billions" of pounds switched from other institutions amid the carnage of the banking crisis. The figures will ease wider concerns over the health of UK bank deposits.

Despite the upbeat tone emanating from RBS, some market observers remain cautious about its assurances and the impact of the nationalisation of Belgian bank Fortis, one of its partners in the consortium that acquired Dutch bank ABN Amro last year.

RBS denied it would suffer any fallout from the problems at Fortis which is trying to offload its share of the Dutch business. But RBS is held responsible by the Dutch regulator for restructuring ABN. It is also still without a buyer for its insurance businesses which it put up for sale with a £7bn price tag earlier this year.

In the latest attempt to soothe investors' nerves Paul Geddes, chief executive of retail banking with RBS, said: "In the current economic climate, consumers are actively seeking attractive havens for their hard-earned cash.

"We introduced new savings deals over the past fortnight, which have generated a big leap in interest from consumers."

Customers transferring their cash ISA to RBS will get a bonus of 2% for 12 months.

One customer, Robbie Coutts, who runs a butcher's business in Fraserburgh, said he and his wife switched their savings accounts and ISAs from Bradford & Bingley and HBOS-owned Intelligent Finance to RBS last week because of fears about the market turmoil.

He said: "I didn't feel confident being with B&B and IF, particularly given all that is going on at HBOS. Nobody was telling me what was happening there. I wanted to move my money to a safer place."

Sources say that customers who have business accounts and savings with both BoS and Lloyds TSB are switching their money to other institutions before the merger goes through because they want to spread their risk.

A BoS corporate customer said: "It's difficult as the guys I'm dealing with at BoS don't know what to expect, so they can't tell me anything. Everyone seems to be in the dark."

However, all British banks remain on alert over the unlimited state guarantee on deposits in Ireland.

Following the demise of some of the biggest names in global banking and last Monday's nationalisation of Bradford & Bingley, British savers and business customers have been transferring funds across the Irish Sea.

There are calls for the UK Government to follow suit with a blanket guarantee or for the European Commission to deem the Irish move anti-competitive.

Critics say the move by the Financial Services Authority to increase the guarantee on savings from £35,000 to £50,000 is not enough.

British bankers are outraged that their Irish counterparts are cold-calling customers to poach their deposits. Irish Nationwide has been marketing itself as "the safest place in Europe to do business".

Ireland's financial regulator has acknowledged that the state guarantee has "had a positive impact for the funding profiles of Irish banks".

A response to the Irish action was expected from yesterday's EU Summit.

RBS was forced on the defensive last week when Fortis was nationalised. Shares in the Scottish bank fell even when those in other banks were rising.

However, some of the fall was attributed to the uncertainty that hung over the $700bn US bailout in which RBS had been seen as a beneficiary.

Debate over the future of Fortis's share in ABN focused initially on ING, but it pulled out last weekend. The Fortis chief executive Filip Dierckx insisted there was no deadline for the sale of the assets.

Even so, the Dutch regulator will not want the uncertainty to linger and is expected to put pressure on RBS to ensure the integration and restructuring goes ahead smoothly.

The latest moves come as wilder speculation surrounds RBS, including rumours that it could follow its rival Scottish bank HBOS and become a bid target. HSBC has been mentioned as a potential suitor.