RBS bank agrees $4.9bn civil penalty to end United States probe

11 May, 2018, 01:46 | Author: Sheri Evans
  • Royal Bank of Scotland is seen at office building in Zurich Thomson Reuters

Royal Bank of Scotland Group PLC (LON: RBS) said after the close on Wednesday that it has agreed to pay US$4.9bn to resolve a US Department of Justice probe into the sale of mortgage-backed securities ahead of the 2008 financial crisis. Those estimates were based, in part, on the size of the bank's MBS portfolio, which was larger than most. RBS finances had been weakened by its...

The preliminary deal follows the DoJ's investigation into the issuance and underwriting of United States residential mortgage-backed securities by the bank between 2005 and 2007, and follows a separate fine of $5.5bn agreed in July 2017 with the Federal Housing Finance Agency.

The prospect of a large penalty had been hanging over the bank for years, making its shares hard to value.

RBS, however, cautioned that the settlement was subject to the parties entering into a legally-binding agreement, with no assurance that they would "agree on the final terms of any proposed settlement". But evidence is mounting that USA enforcers are willing to settle for smaller penalties to end mortgage probes.

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Obama-era settlements were significantly more costly.

A preliminary settlement with the Department of Justice also makes it easier for the United Kingdom government to attract buyers for its approximate 70 percent stake after bailing out RBS during the financial crisis.

Britain's Conservative government is meanwhile planning to return RBS to private ownership with the aim of selling £15 billion of its stake by 2023.

Top Justice Department officials have been signaling their less punitive approach to enforcement.

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The Department of Justice has previously settled with a whole list of banks including Citigroup, Deutsche Bank, JPMorgan Chase, Credit Suisse, Morgan Stanley, Goldman Sachs, Bank of America and Barclays for a total of more than $60 billion. Sessions argued that such money too often went to groups that weren't harmed by the illicit conduct and had political agendas. The company was maintained on Wednesday, November 29 by Berenberg.

A spokesman for RBS confirmed the new policy.

RBS is also expected to resume dividend payouts to shareholders following the settlement.

RBS has already accepted some wrongdoing and set aside 400 million pounds 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.

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