RBS Agrees to $4.64 Billion Fine in Pre-Crisis Mortgage Probe

  • RBS Agrees to $4.64 Billion Fine in Pre-Crisis Mortgage Probe

RBS Agrees to $4.64 Billion Fine in Pre-Crisis Mortgage Probe

RBS noted that as at the end of the first quarter of 2017 it held USD8.30 billion in provision over its mortgage-backed security issues, of which USD4.55 billion related to the Federal Housing Finance Agency claim.

Under the settlement, RBS will pay the U.S. regulator $5.5 billion, of which $754 million will be reimbursed to the FTSE 100 group under indemnification agreements with third parties.

The bank has faced a series of litigation claims about mis-selling mortgage backed securities in the U.S. in the run-up to the financial crisis.

The system-wide failure of complex securities derived from residential mortgages caused a cascading wave of bankruptcies and crises that sparked a global recession, leading to tens of millions of job losses around the world.

RBS had already put $8.3 billion to cover USA mis-selling claims, from which the Wednesday settlement will be deducted.

The British government took over RBS after the financial crisis that rocked the globe and taxpayers still own 72 percent of the Edinburgh-based institution.

RSB US mortgage fine bonds mis selling Royal Bank of Scotland
GETTYRoyal Bank of Scotland agreed the sum with US regulators to settle a mis-selling claim

He called the settlement an "important step forward" in resolving one of the bank's biggest legacy problems. The bank has reserved a further US$3.7bn for this and related outstanding charges.

"The elephant in the room is the US Department of Justice fine, which is likely to be sizeable, and is subject to a high degree of uncertainty".

This included paying 1 billion pounds to settle with shareholders who claim they were misled before its near collapse in 2008, while the government has backed a new plan to resolve its European Union state-aid requirements.

The FHFA, which oversees mortgage giants Fannie Mae and Freddie Mac, said the Royal Bank of Scotland would pay a $5.5 billion fine over its subprime mortgage lending practices between 2005 and 2007. Lehman Brothers Holdings Inc went bankrupt one week after that seizure. The bank also has to resolve European competition issues, which required it to spin out a challenger bank as part of the terms of its state bailout.

The shares are now worth around half the price the government paid for them but Philip Hammond has indicated that the government may be prepared to start selling shares at a loss.