RBS agrees $1.1bn US mis-selling settlement

Edinburgh-based RBS, which is still 73 per cent owned by the UK taxpayer having been bailed-out to the tune of £45bn in the midst of that crisis, sold the securities in question to two credit unions, which failed after the US housing bubble burst the same year RBS went to the wall.

The settlement is with the National Credit Union Administration Board (NCUA), which regulates credit unions.

A statement from RBS said: “The Royal Bank of Scotland Group plc (RBS Group) has reached a final settlement with the National Credit Union Administration Board to resolve two outstanding civil lawsuits for US$ 1.1 billion (£846 million). The settlements, involving its subsidiary RBS Securities Inc., relate to the two residential mortgage-backed securities (RMBS) cases (asserting claims on behalf of US Central Federal Credit Union and Western Corporate Federal Credit Union), most recently disclosed in RBS’s 2016 Interim Results Announcement (“2016 Interim Results”). The settlement amount is substantially covered by existing provisions as of 30 June 2016 and will have no material impact on the RBS Group’s CET1 ratio.”

RBS, which under the deal does not admit fault, continues to face faces outstanding civil and criminal actions from the US Department of Justice (DoJ) and the Federal Housing Finance Agency.

RBS chief executive Ross McEwan said at the Bank of America Merrill Lynch conference in London on Tuesday that the bank was working to resolve outstanding claims, but that this could create “additional conduct provisions and noise” over the next few months.

The bank’s existing provisions totalled $3.8bn at the end of June.

RBS shares have been hit recently after the DoJ slapped a $14bn penalty on Deutsche Bank for mis-selling mortgage-backed securities, sparking fears that the demand would cripple the German firm.

The NCUA has so far collected $4.3bn in settlements of various civil lawsuits over mis-sold mortgage securities. The proceeds are used to pay claims against five failed credit unions.

NCUA chairman Rick Metsger said the regulator was pleased with the RBS settlement and plans to continue “to pursue recoveries against financial firms that we maintain contributed to the corporate crisis”.

Meanwhile, Mr McEwan has confirmed that the bank is looking at “alternative means” of offloading Williams & Glyn to meet the demands imposed on it by the EU as a result of its government bailout.

Speaking a week after Spanish banking giant Santander withdrew from talks to buy the business, Mr McEwan admitted that failing to achieve an asset sale for the business which comprises around 300 RBS and Natwest branches by the end of this year would leave the bank in “uncharted territory”.

The terms of the lender’s bailout stipulate that a deal must be struck by the end of 2017.

The latest comments from the bank’s boss come as speculation has surfaced that Clydesdale Bank owner CYBG could be interested.

Speaking at the same conference, Mr McEwan said that “a more uncertain economic outlook and lower-forlonger rate environment undermine the standalone viability of the entity”.