Wednesday, 13 December, 2017

RBS agrees £3.65bn settlement over risky United States mortgages

Royal Bank Of Scotland Group: Settlement Reached With The Federal Housing Finance Agency Regarding US RMBS Claims RBS to pay $4.75bn in RMBS settlement
Juana Turner | 13 July, 2017, 01:00

However, $US754 million (£581 million) will be reimbursed to RBS "under indemnification agreements with third parties", the bank said, meaning the net cost of the settlement is $US4.75 billion (£3.65 billion).

It relates to sales to USA government-backed loan firms Fannie Mae and Freddie Mac prior to the 2008 financial crisis, when RBS was among the biggest players on Wall Street.

As previously disclosed, RBS continues to cooperate with RMBS related investigations and proceedings (both formal and informal) by federal and state governmental law enforcement and other agencies including the US Department of Justice ("DOJ") and various other members of the RMBS Working Group of the US Financial Fraud Enforcement Task Force.

Taking another step to resolve claims arising from its sales of toxic mortgage-backed securities, Royal Bank of Scotland has agreed to pay the U.S. Federal Housing Finance Agency $5.5 billion.

In January this year RBS revealed it had almost doubled provisions to cover litigation related to mortgage back-securities to £3.1 billion.

The expected fines have weighed heavy on the bank amid fears over the size of the settlements.

RBS finance chief Ewen Stevenson said the FHFA settlement was "in the region of what we'd been anticipating".

Edward Kirth, an analyst at KBW, said in a note to clients RBS will probably have to pay a further $10 billion to settle with the DOJ and other legal cases.

"We have always been very open about the fact there could be further provisions", he said.

Shares lifted more than 1% after the settlement was announced.

"It's never a great experience for a CEO to effectively be writing such a large check - 4.2 billion pounds", McEwan said on a conference call with reporters. At the end of the first quarter RBS said it held a provision of US$8.3bn against RMBS exposure, of which US$4.55bn was related to FHFA litigation.

RBS last month reached a deal with thousands of United Kingdom investors to avoid a high-profile court trial. It put aside £6.6bn to cover the cost of misselling so-called residential mortgage backed securities (RMBS) and the penalty from FHFA accounted for £3.6 bn of this.

The government still owns 72% of RBS.

Recommended

Apple Has Just Weeks to Fix its Fingerprint Problem, Says KeyBanc Apple Has Just Weeks to Fix its Fingerprint Problem, Says KeyBanc There's also a possibility that the iPhone 8 might even launch with some of its major new features disabled due to the situation. Screen technology is also expected to get a refresh, with Apple moving towards OLED ( organic light emitting diode ) glass.

Yellen words to be parsed for rates clues Yellen words to be parsed for rates clues Yellen's testimony still noted that she expects gradual rate hikes to be appropriate over the next few years. On Thursday morning, Yellen will speak before the Senate Committee on Banking, Housing, and Urban Affairs.

Jailed Chinese Nobel laureate's condition life threatening, says hospital Jailed Chinese Nobel laureate's condition life threatening, says hospital The doctors added that both their institutions have agreed and are prepared to accept Liu for cancer treatment. Liu, China's most prominent political prisoner, is being treated for late-stage liver cancer.