The Strategist

Royal Bank of Scotland to pay $ 4.9 billion to the US

05/10/2018 - 12:44

Royal Bank of Scotland Group Plc reached a preliminary agreement on payment of $ 4.9 billion to settle the US claims in investigation of transactions with mortgage securities. This is reported by Bloomberg.

Elliott Brown
Elliott Brown
Thus, RBS eliminated one of the last barriers that prevented the UK from reducing its stake in the bank.

The bank’s management said that the RBS will begin negotiations with the British regulators on resumption of dividend payment after a ten-year hiatus.

In the coming weeks, the bank expects to reach a final agreement with the US in investigation of the sale of mortgage-backed securities.

"Eliminating uncertainty about the scale of this settlement makes investment attractiveness of this bank much more obvious," said the RBS’s CEO Ross McEwan. It is a "landmark moment" and "the price we have to pay for the global ambitions pursued by the bank before the crisis," he added.

Most of the costs will be covered by the money that RBS has already reserved. Nevertheless, the agreement with the US will cut profit for the II quarter by $ 1.44 billion, the bank warned.

The RBS agreement with the US Department of Justice allows the UK government to find buyers for its share of about 70% in a bank that had to be rescued in the financial crisis. 

Recall that the British government spent 45.5 billion pounds ($ 61.6 billion) to save RBS.

Last year, RBS agreed to pay $ 5.5 billion to the US Federal Housing Finance Agency (FHFA). The agency accused the bank of the fact that in 2005-2007 it sold mortgage-backed securities to mortgage agencies Fannie Mae and Freddie Mac with underestimation of risks. This was one of the reasons that led to the global financial crisis.

In March 2018, the US authorities filed a fine of $ 500 million for Royal Bank of Scotland. The bank was accused in fraud of investors associated with the sale of mortgage securities. RBS was ordered to pay $ 100 million to the authorities of the State of New York and another $ 400 million - to a fund for the construction of "affordable housing" in the United States.