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RBS agrees $4.9bn to settle United States subprime case

11 May, 2018, 01:02 | Author: Samuel Sharp
  • Royal Bank of Scotland chief executive Ross McEwan

The penalty from the US Department of Justice resolves the investigation into the lender's "issuance and underwriting of US residential mortgage-backed securities" between 2005 and 2007, RBS said this morning. The British government insisted that the USA claims had to be resolved before it could sell its 72 percent stake in RBS.

RBS is one of the last to settle with USA regulators, following rival Barclays, which agreed a two billion U.S. dollar (£1.5 billion) agreement in March with the DoJ and Deutsche Bank, which struck a 7.2 billion United States dollars (£5.3 billion) settlement at the end of 2016. Barclays (LSE: BARC.L - news) agreed to a $2bn (£1.4bn) settlement with the DOJ in March.

RBS agreed to pay $5.5 billion a year ago to settle a separate investigation by the US Federal Housing Finance Agency.

RBS was bailed out by the government at the height of the financial crisis.

The proposed settlement is subject to the Department of Justice and RBS entering into a legally-binding agreement, and there can be no assurance that the parties will agree on the final terms of any proposed settlement, RBS said. The British government announced in November that it planned to sell off £3 billion ($4.07 billion) worth of RBS shares in the 2018-2019 fiscal year and it looks as if those plans will now go ahead. It had already paid just over $7 billion in other settlements with various US authorities.

With (Other OTC: WWTH - news) the penalty paid, RBS can now open talks with United Kingdom regulators about the resumption of dividend payments.


"The fact they can begin to think about how to return that to shareholders is a major and long-awaited change", said Olivia Treharne, a fund manager at Legal & General Investment Management, RBS's number 10 shareholder according to Thomson Reuters data.

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.

"This is hardly a Silicon Valley company".

"We need to consider the impact on innocent employees, customers and investors who seek to resolve problems and move on", he said. The DOJ settlement could clear the way for the government to offload its stake.

RBS may have benefited from settling under Trump's administration, which has been softer on banks than that of his predecessor Barack Obama.

RBS said about £2.6billion of the penalty would be covered by money already set aside.

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