Business World

Saturday 21 October 2017

RBS agrees to pay $5.5bn to US authorities over sub-prime mortage bond sales

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

Ben Chapman

Royal Bank of Scotland (RBS) has agreed to pay a $5.5bn (€4.8bn) fine to US authorities over its sales of sub-prime mortgage bonds in the lead-up to the financial crisis.

The bank, 71pc of which is UK taxpayer-owned, will pay the penalty from the Federal Housing Finance Agency, as part of long-running disputes with authorities in the US over the sale of bonds backed by toxic mortgages.

RBS sold the bonds to US government-backed loan firms Fannie Mae and Freddie Mac, before the 2008 financial meltdown which brought the global economy to the brink of collapse.

Read more: RBS case investors settle for £200m

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

The chief executive of RBS, Ross McEwan, said: “[The] announcement is an important step forward in resolving one of the most significant legacy matters facing RBS, and is further evidence of the determination of the bank’s leadership to put our remaining issues behind us.

“This settlement is a stark reminder of what happened to this bank before the financial crisis, and the heavy price paid for its pursuit of global ambitions.”

RBS said it had largely made previous provisions for the FHFA penalty, but it would take a further charge in its second quarter of £151m (€171m) to cover the cost.

Independent News Service

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