Roybal Bank of Scotland pays $5.5B fine over shoddy mortgage practices

Roybal Bank of Scotland pays $5.5B fine over shoddy mortgage practices

Roybal Bank of Scotland pays $5.5B fine over shoddy mortgage practices

RBS is to pay a $5.5bn settlement to the US Federal Housing Finance Agency or misselling toxic mortgage bonds in the run-up to the financial crisis.

RBS noted that as at the end of the first quarter of 2017 it held USD8.30 billion in provision over its mortgage-backed security issues, of which USD4.55 billion related to the Federal Housing Finance Agency claim.

While the bank has agreed to pay £4.2 billion in total, 754 million United States dollars (£581 million) of the settlement will be paid under indemnification agreements with third parties.

RBS still has about $3.7 billion put aside to resolve lawsuits over mortgage-backed securities, packaged and sold before the USA housing meltdown and financial crisis in 2008.

The system-wide failure of complex securities derived from residential mortgages caused a cascading wave of bankruptcies and crises that sparked a global recession, leading to tens of millions of job losses around the world.

The Federal Housing Finance Agency sued 18 major US and foreign banks in 2011 over their sales of mortgage securities to Fannie and Freddie.

It has also been a major hurdle to the bank's return to private hands, with the Government having said the USA mis-selling claims need to be resolved before it can start to sell its shares in the lender. 'The settlement removes a major uncertainty surrounding RBS's capital resources, ' he said.

A separate deal is expected with the US Department of Justice, and the bank has built up a war chest of around £3bn in anticipation of this.

The settlement relates to approximately USD32.0 billion in mortgage-backed securities which were issued by RBS before the 2008 crisis.

"The duration and outcome of these investigations, including in particular the DoJ's civil and criminal investigations, and other RMBS litigation matters remain uncertain, including in respect of whether settlements for all or any of such matters may be reached", said the bank.

The government still owns 72% of RBS. Accern also gave media coverage about the financial services provider an impact score of 0 out of 100, indicating that recent media coverage is extremely unlikely to have an effect on the stock's share price in the near future.

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