RBS to pay $4.75bn in RMBS settlement

Image      RBS is yet to conclude settlement talks with the US Justice Dept

Image RBS is yet to conclude settlement talks with the US Justice Dept

Taking another step to resolve claims arising from its sales of toxic mortgage-backed securities, Royal Bank of Scotland has agreed to pay the U.S. Federal Housing Finance Agency $5.5 billion.

Royal Bank of Scotland has agreed to settle a law suit with US regulators over claims it missold $32 billion of toxic mortgage-backed securities.

The settlement has been reached with the Federal Housing Finance Agency, which overseas parts of the secondary mortgage market.

To view the full article, register now.

While the bank will pay 5.5 billion United States dollars (£4.2 billion) in total to the FHFA, 754 million USA dollars (£581 million) will be repaid to RBS by other parties under a so-called indemnification agreement.

RBS CEO Ross McEwan characterized the settlement as a "stark reminder" of the heavy price British taxpayer and the bank itself paid for the global ambitions of the institution under disgraced former boss Fred Goodwin.

RBS issued a statement saying the settlement was expected to reduce its third-quarter income and it will record a charge of 151 million pounds in next month's result related to the fine.

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.

Royal Bank of Scotland will pay $5.5 billion to settle one of two major US investigations into allegations it mis-sold mortgage-backed bonds that it needs to resolve before the British government can sell its shares.

RBS still faces another separate deal with the US Department of Justice which could be even more costly.

In January this year RBS revealed it had almost doubled provisions to cover litigation related to mortgage back-securities to £3.1 billion.

RBS said following this agreement, unresolved RMBS litigation matters involve the issuance of less than $1bn of RMBS issued primarily from 2005 to 2007.

Narwhal Capital Management increased its stake in shares of Royal Bank Scotland PLC (The) (NYSE:RBS) by 25.8% during the second quarter, according to its most recent 13F filing with the Securities and Exchange Commission (SEC).

Latest News