RBS could face $13bn bill in US case over pre-2008 behaviour

Case in Connecticut court relates to the way 79% taxpayer-owned bank packaged up mortgage bonds and sold them to government lenders

Royal Bank of Scotland has been warned in a US court that it could face a $13bn (£8.3bn) bill in a case making allegations about its behaviour before the 2008 crisis.

The 79% taxpayer-owned bank is fighting a long-running case in a Connecticut court relating to the way it packaged up mortgage bonds and sold them to government lenders overseen by the Federal Housing Finance Agency.

The FHFA brought the case in 2011 and it is yet to go to trial, although RBS has made repeated references to the legal proceedings in its disclosures to shareholders in its annual report.

Analysts have been estimating a potential cost for the Connecticut action but until now a potential figure had not been put on the size of the suit, uncovered by Bloomberg which looked at recent filings related to the case.

RBS would not comment on the figure that Bloomberg said was derived by looking at a previous judgment – worth $806m – in another case involving RBS in a different court. RBS has so far set aside £5.4bn to cover the cost of past errors and misdeeds, according to its results of the first three months of 2015.

Ross McEwan, the boss of RBS, warned at the time: “There are still many conduct and litigation hurdles looming on the horizon.” However, it is regarded as unlikely that the final sum will be $13bn.

The bank is also facing a fine relating to the sale of bonds. The payouts are looming at a time when the chancellor, George Osborne, has said he is ready to start selling off the taxpayer stake in the bank, even though the shares are still worth £13bn less than was paid for them.

While the first sale of RBS shares is yet to take place, the government’s stake in Lloyds Banking Group fell further on Thursday – to less than 16% – after another chunk of shares was sold off. The stake stood at 43% after LBG’s bailout in 2008.


Jill Treanor

The GuardianTramp

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