Royal Bank of Scotland is to pay $1.1bn (£846m) to a US regulator to resolve allegations it missold mortgage bonds to credit unions in the run up to the 2008 banking crisis.
The settlement with the National Credit Union Administration (NCUA) board is one of three major issues facing the bailed-out bank relating to the way it sold so-called residential-mortgage-backed securities (RMBS) before its £45bn taxpayer bailout.
The sum is included in the £3.8bn of provisions the bank has already made to tackle upcoming litigation, but the bank’s chief executive, Ross McEwan, has been warning that RBS faces other penalties from the US authorities.
In a presentation on Tuesday he said settlement talks were under way with the NCUA and the Federal Housing Finance Agency but not with the US Department of Justice (DoJ). Analysts have estimated a settlement with the DoJ could amount to £9bn.
Anxiety about the scale of the penalty facing Deutsche Bank from the DoJ has helped drive shares in Germany’s biggest bank to near 30-year lows.
As it announced the settlement with the NCUA, RBS reiterated it might need to increase its provisions. It said it was responding to “investigations by the civil and criminal divisions of the US Department of Justice and various other members of the RMBS working group of the financial fraud enforcement task force (including several state attorneys general).
“As previously stated, RMBS litigation and investigations may require additional provisions in future periods that in aggregate could be materially in excess of the (current) provisions,” the bank said.
McEwan had hoped to have resolved the discussions with the DoJ by now but the bank has signalled this might not happen until next year. On Tuesday, before this settlement was reached, McEwan had warned issues from the past were “going to result in substantial additional conduct provisions and noise, but we remain focused on the task at hand of continuing to build a really good bank for customers and investors”.
The bank’s shares have been knocked by Deutsche’s woes and closed around 175p – well below the 502p average price the taxpayer paid for its 73% stake in the bank.
