Royal Bank of Scotland pays US$5.5 billion to settle US mortgage cases left over from global crisis
Settlement is a key milestone so RBS can put its past sins behind it
Royal Bank of Scotland said on Wednesday it has reached a US$5.5 billion settlement in the United States over the mis-selling of mortgage-backed securities before the financial crisis, a key milestone in the institution’s efforts to put its past sins behind it.
The deal with the Federal Housing Finance Agency, the conservator of Fannie Mae and Freddie Mac, resolves claims regarding the issuance and underwriting of approximately US$32 billion (25 billion pounds) of residential mortgage-backed securities. The bank must still resolve outstanding civil and criminal claims with the US Department of Justice.
RBS CEO Ross McEwan characterised the settlement as a “stark reminder” of the heavy price British taxpayers and the bank itself paid for the global ambitions of the institution under disgraced former boss Fred Goodwin.
“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. Nonetheless, he said that the bank was “nearly through” with issues that have dogged efforts to return to profit.
The Federal Housing Finance Agency sued 18 major US and foreign banks in 2011 over their sales of mortgage securities to Fannie and Freddie. The total price for the securities sold was US$196 billion.
The settlement with Royal Bank of Scotland was the 17th agreement reached by the agency.
