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Published: Thu, July 13, 2017
Economy | By Melissa Porter

RBS Agrees on $5.5 Billion Settlement over Mortgage-Backed Securities Charges

RBS Agrees on $5.5 Billion Settlement over Mortgage-Backed Securities Charges

Royal Bank of Scotland has said it paid a "heavy price" for past mistakes as it agreed a £4.2 billion USA settlement over claims it mis-sold toxic mortgage bonds in the run-up to the financial crisis.

The litigation is in relation to RBS's issuance and underwriting of approximately $32bn (£25bn) of residential mortgage-backed securities (RMBS) in the United States prior to the financial crisis.

RBS has agreed to pay a $5.5bn fine (£4,2bn) to USA authorities over its sales of sub-prime mortgage bonds in the lead-up to the financial crisis.

That puts the bank's settlement at US$4.75bn, in line with analysts' expectations.

The system-wide failure of complex securities derived from residential mortgages caused a cascading wave of bankruptcies and crises that sparked a global recession, leading to tens of millions of job losses around the world.

Although the settlement is enormous - it is not unexpected and RBS had already set aside £6.7 billion to settle their final bill.

Mr McEwan cautioned that the bank may need to set aside more cash to settle outstanding claims.

He called the settlement an "important step forward" in resolving one of the bank's biggest legacy problems.

The bank, whose shares were broadly flat at 1400 GMT, said it will record a charge of 151 million pounds in next month's result related to the fine. The companies received taxpayer aid totaling $187 billion.

RBS said it had not yet started discussions with the DoJ.

The settlement agreement resolves all claims in the lawsuit FHFA v.

The FHFA, which oversees mortgage giants Fannie Mae and Freddie Mac, said the Royal Bank of Scotland would pay a $5.5 billion fine over its subprime mortgage lending practices between 2005 and 2007.

In September 2008, the USA government appointed the FHFA as conservator for Fannie Mae and Freddie Mac after seizing the mortgage financiers.

The British government has said it will not resume selling its stake until the bank settles its USA fines and resolves its state aid requirements.

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).

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