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RBS Sets Aside $4 Billion for US Mortgage Mis-selling

Image: RBS Sets Aside $4 Billion for US Mortgage Mis-selling

Thursday, 26 Jan 2017 05:52 AM

Royal Bank of Scotland has taken a 3.1 billion pound ($3.92 billion) provision as it prepares to settle claims in the United States that it mis-sold toxic mortgage-backed securities in the run up to the 2008 financial crisis.

The surprise provision means that RBS is unlikely to make a profit in 2016, the ninth straight year the bank has failed to make an annual profit.

RBS is currently in negotiations with the U.S. Department of Justice over the settlement, the timing of which is still uncertain.

This is the first time that RBS has set aside any money to directly cover a settlement with the U.S. Department of Justice over the alleged decades-old mis-selling of mortgage-backed securities.

RBS is the latest European bank to be close to a settlement with U.S. authorities. Credit Suisse earlier this month agreed to pay $5.3 billion and Deutsche Bank agreed to pay $7.2 billion to settle their respective mis-selling cases.

These settlements stem from an initiative launched in 2012 by former U.S. President Barack Obama to hold Wall Street accountable for misconduct in the sale of the securities that helped to trigger the worst economic crisis since the Great Depression.

RBS Chief Executive Ross McEwan has been trying to clean up RBS's balance sheet and end an array of legal cases so the government can sell its more than 70 percent stake in the bank after a 45.5 billion pound bailout during the financial crisis.

The British government has said that the uncertainty about the scale of the penalty is one of the reasons why it halted plans to sell any further shares in the lender.

"Putting our legacy litigation issues behind us, including those relating to RMBS, remains a key part of our strategy," McEwan said in a statement.

RBS said in the statement it continued to cooperate with the Department of Justice, although it remained uncertain when a settlement might be reached.

The bank said the total misconduct bill for mis-selling these securities might exceed its provisions.

© 2017 Thomson/Reuters. All rights reserved.

 
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Royal Bank of Scotland has taken a 3.1 billion pound ($3.92 billion) provision as it prepares to settle claims in the United States that it mis-sold toxic mortgage-backed securities in the run up to the 2008 financial crisis.
rbs, mortgage, selling, charge
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2017-52-26
Thursday, 26 Jan 2017 05:52 AM
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