RBS rocked by further £3.2bn mortgage scandal costs

Edinburgh-based RBS said it is setting aside up to £3.2 billion in its latest provision related to an ongoing investigation by the US Justice Department into the scandal involving the mis-selling of mortgage securities prior to the financial crash that resulted in the bank requiring a £45 billion government bail-out.

In a statement, the still more than 70 per cent state-owned lender said: “The Royal Bank of Scotland Group plc will announce its Full Year 2016 results on 24 February 2017. Subject to any increase being required by intervening developments, the Q4 2016 results will reflect the taking of a further £3.1bn ($3.8bn) provision in relation to various investigations and litigation matters relating to RBS’s issuance and underwriting of US residential mortgage-backed securities.”

RBS also noted: “This takes the total aggregate of such provisions to £6.7bn ($8.3bn) as at 31 December 2016.”

The announcement before the release of the bank’s full results would seem to be an attempt to head-off the shock of what is now expected to be RBS’s biggest year of losses since the tumult of 2008.

The US mortgage securities probe is also now the main obstacle to RBS being sold off by the Government’s UK Financial Investments (UKFI) body.

UKFI chief executive Oliver Holbourn previously said it is understandable investors should be given “more clarity” before a sell-off of its 72 per cent stake.

RBS said that it is “continuing to cooperate with the US Department of Justice in its civil and criminal investigations of RMBS (residential mortgage-backed securities) matters, and RBS considers it appropriate to take this provision now in relation to those investigations as well as other RMBS litigation matters.

“The duration and outcome of these investigations and other RMBS litigation matters remain uncertain, including in respect of whether settlements for all or any of such matters may be reached.”

RBS also conceded that yet more cash may be needed before the long-running saga is finally brought to a close.

The bank’s statement added: “RBS emphasises that further substantial additional provisions and costs may be recognised and, depending on the final outcome, other adverse consequences may occur.”

RBS’s chief executive officer, Ross McEwan, said: “Putting our legacy litigation issues behind us, including those relating to RMBS, remains a key part of our strategy. It is our priority to seek the best outcome for our shareholders, customers and employees.”