Royal Bank of Scotland Group (LON:RBS) has reached a $5.5-billion settlement with US authorities over mis-sold mortgage bonds in the run-up to the fin
Royal Bank of Scotland Group (LON:RBS) has reached a $5.5-billion settlement with US authorities over mis-sold mortgage bonds in the run-up to the financial crisis, the blue-chip company has said. The deal comes as the FTSE 100 lender looks to draw a line under its turbulent past.
RBS’ share price has given up some of its earlier gains in afternoon trade and was standing 0.39 percent higher at 257.50p as of 14:27 BST, underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 1.11 percent higher at 7,411.05 points. The group’s shares have added more than 41 percent to their value over the past year, and are up by nearly 15 percent in the year-to-date.
RBS announced in a statement today that it had reached a settlement with the Federal Housing Finance Agency (FHFA) to resolve claims related to the lender’s issuance and underwriting of approximately $32 billion (£25 billion) of residential mortgage-backed securities in the US. Under the settlement, RBS will pay the US regulator $5.5 billion, of which $754 million will be reimbursed to the FTSE 100 group under indemnification agreements with third parties.
“Today’s 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,” RBS chief executive Ross McEwan commented in the statement.
The settlement relates to the mis-selling of mortgages to the US government-backed loan firms Fannie Mae and Freddie Mac, with RBS’ settlement with the US Department of Justice still pending. The bank said today that it continued to cooperate with RMBS-related investigations and proceedings, but that their duration and outcome, including those of the DOJ’s civil and criminal investigations, remained uncertain.
RBS pointed out that the cost of today’s settlement was largely covered by existing provisions. The lender nevertheless will take an incremental charge of $196 million in its second-quarter results due out on August 4.