US demands $13bn from RBS to settle mortgage bundle misconduct claims

The UK taxpayer still owns 79pc of the group and the news will come as a huge blow to Chancellor George Osborne who announced last month that he plans to start selling-off the government’s stake later this year.

The figure, which is far above what analysts had expected, was demanded by the Federal Housing Finance Agency (FHFA).

It announced the total in a New York court as part of one of two cases RBS is involved in over MBS. The other is in Connecticut.

The FHFA’s lawyer, Philippe Selendy, said in a filing that his court case “extrapolates to a judgment in the Connecticut action of nearly $13bn”.

He added that this “massive exposure” would mean the bank would not be able to afford to settle both cases.

A judge has already sided with the FHFA in the New York case, in a ruling that could allow the FHFA to recover around $450m. RBS is expected to appeal the decision.

The $13bn sum, which was first reported by The Financial Times, is a worst case scenario that would only be applied if the Connecticut case went to court, RBS settled and the amount was agreed upon.

The bank is also planning to offload $3bn-worth of shares in American bank Citizens, after floating the business last year.

The bank also hopes to return to profit in 2016 for the first time since its £46bn bailout in 2008. It announced a £3.5bn annual loss for last year.

RBS has already taken a £400m hit for PPI compensation, £430m for US fines related to foreign exchange rigging, and another £444m of conduct and litigation charges in the fourth quarter of last year.

RBS declined to comment.

Meanwhile, the bank did announce that it will intact plans to withdraw cash management and trade finance services to thousands of customers outside the UK and Ireland.

The lender, which announced the plan in February as part of its strategy to shrink its investment bank and international operations, will instead refer customers to French bank BNP Paribas.

RBS said it will continue to offer transaction services to small and large businesses in the UK as well as multinational businesses in western Europe, the US, and Asia Pacific that have significant links to the UK and Ireland. It will also maintain the existing service to global financial institutions.

The bank said there would be a streamlined process to make the transition as smooth as possible. It was confident Paribas had “the people, country coverage, strong global product capability and infrastructure in transaction services to be an attractive alternative for our affected customers”.

Outgoing chairman Sir Philip Hampton told last month’s annual meeting that when he arrived in 2009, RBS had been in 53 countries with almost 200,000 employees and was “offering products and services where it simply didn’t have the scale to compete”.

It has slashed £900billion of assets from the balance sheet and is now focusing on 14 countries.