Royal Bank of Scotland has been fined £2.8 million for "multiple failings" in the way it handled customers' complaints, the City watchdog said today.
The Financial Services Authority said the part-nationalised bank responded inadequately to more than half of all the complaints it reviewed.
It said there was a "high risk" that customers of both RBS and its NatWest brand may not have been treated fairly due to a catalogue of failings in the bank's approach to handling routine complaints.
These failings included delays in responding to customers and poor quality investigations into complaints, with complaints handlers failing to obtain and take into account all relevant information when making a decision.
The group also issued correspondence which failed to fully address all of the concerns raised by customers, while it did not explain why complaints had been upheld or rejected.
Customers were also not given information on their right to refer their complaint to the Financial Ombudsman Service within the appropriate time period.
Overall, the FSA said 53% of the cases it reviewed showed deficient complaint handling, while in 62% of cases the bank failed to follow FSA rules on giving people information on the Financial Ombudsman Service and in 31% of cases it did not demonstrate fair outcomes for consumers.
The regulator said the problems stemmed from the fact that the bank did not give staff adequate training and guidance on how to properly handle a complaint.
It also failed to monitor complaint handling in branches and the management information produced was not enough to assess whether customers were being treated fairly.
RBS also failed to ensure that complaint handlers properly reviewed complaints, taking into account all of the relevant factors.
The investigation looked at routine banking complaints lodged during 2009, and did not include complaints about controversial payment protection insurance or unauthorised overdraft charges.
It is not known exactly how many customers may have been affected but, during the period covered by the review, RBS was the second largest provider of retail banking products and services in the UK, with around 2,200 branches and 15 million customers.
Figures on the group's website show that 29,035 RBS customers and 68,589 NatWest customers complained about banking products during the second half of 2009, excluding complaints about unauthorised overdrafts.
Margaret Cole, the FSA's managing director of enforcement and financial crime, said: "We expect firms to treat customers fairly and that consumers can be confident that their complaints will be dealt with properly.
"The failure of these two high street banks to deal adequately with complaints put consumers at unacceptable risk and the fine of £2.8 million reflects this."
The regulator said RBS had co-operated fully with the investigation, and agreed to make significant changes to the way it deals with complaints, including working with an "independent skilled person" on an extensive review of all parts of its complaints handling arrangements.
The group agreed to settle at an early stage of the investigation and, as a result, it qualified for a 30% discount in its fine, without which the penalty would have been £4 million.
The problems were uncovered during an FSA review of the way the UK's major banks handle complaints.
As a result of the review, a total of five banks, of which only RBS has been named, have taken significant action to improve the way they handle complaints.
Brian Hartzer, chief executive of UK Retail, Wealth and Ulster Bank at RBS, said: "We acknowledge the findings of the FSA investigation.
"It confirmed shortcomings in our routine complaint-handling that we assessed in our own internal review and which we are committed to putting right.
"We recognise the importance of complaint handling for our customers and are focused on addressing the root causes of complaints.
"Such is our determination to get this right for our customers that complaint resolution features as one of our Customer Charter commitments."