Published: Fri, May 11, 2018
Economy | By

RBS agrees $4.9bn settlement with United States over mortgage probe

RBS agrees $4.9bn settlement with United States over mortgage probe

"Today's announcement is a milestone moment for the bank", said chief executive Ross McEwan.

RBS said that $3.46bn of the proposed civil settlement would be covered by existing provisions and that the bank would take a $1.44bn charge in the second quarter to cover the rest.

Under the agreement, the bank will pay a penalty of $4.9 billion. However, as per analysts' opinion, the United States Department of Justice might impose a lawsuit of Dollars 12 billion on RBS for mis-selling the mortgage backed securities.

He said that "removing the uncertainty" would mean that RBS, bailed out by the United Kingdom taxpayer during the financial crisis, would make the bank much stronger. The Justice Department originally wanted a fine of about $5 billion, but the British lender refused to pay any more than $2 billion, Bloomberg had reported in 2016.

The deal would resolve a major issue that has weighed on the company's share price and complicated the United Kingdom government's plan to sell down its more than 70% stake in the bank.

RBS previously agreed in July 2017 to pay US$5.5bn to resolve a lawsuit by the Federal Housing Finance Agency, the conservator for Fannie Mae and Freddie Mac, claiming it misled the U.S. mortgage giants into buying mortgage-backed securities.

RBS was rescued by the government in 2008 as confidence in British lenders slumped due to their exposure to U.S. subprime mortgages. As per reliable sources, the regional government had confirmed that the process of reprivatizing the bailed-out lender is soon to commence via the sale of 3 billion pounds of shares before the culmination of the 2018-2019 fiscal year.

"That's the last really big milestone before the bank can be seen to be fully normalised". Last year, Attorney General Jeff Sessions instructed US attorneys to no longer include third-party consumer relief in corporate penalties, which had been an Obama administration practice that contributed to the headline-grabbing penalty sizes for Bank of America, Credit Suisse, Deutsche Bank and Citigroup.

"This is hardly a Silicon Valley company".

After ten years of restructuring, paying fines and shedding around 1.5 trillion pounds in assets, the DOJ settlement means RBS's last large legacy issue is out of the way.

"We need to consider the impact on innocent employees, customers and investors who seek to resolve problems and move on", he said.

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

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