Business

RBS agrees $4.9bn settlement with U.S. over mortgage probe

RBS agrees $4.9bn settlement with U.S. over mortgage probe

RBS was one of the last banks to reach a settlement with the USA government to resolve investigations into its marketing and sale of residential mortgage-backed securities in the run-up to the 2008 financial crisis.

RBS said it would be able to cover the bulk of the penalty out of existing provisions alongside a $1.44 billion charge it will take in the second quarter of this year.

Bank of America paid the highest sum of $16.7 billion as part of an accord that also resolved claims by other federal agencies and several states.

But the settlement still needs to be finalised, with further details set to be negotiated.

Shares in RBS jumped 4.5 per cent to 288.5 pence in early deals on London's benchmark FTSE 100 index, which was up 0.2 per cent overall.

RBS is the latest bank to settle claims of mis-selling in the run-up to the financial crisis.

Last year, the government said it would start reprivatizing RBS by selling £3 billion ($4 billion) of shares before the end of the 2018-2019 financial year.

More news: Neymar close to Real Madrid move after secret transfer meeting
More news: Bank of England keeps rates unchanged
More news: World Bank denies Nawaz Sharif laundered $4.9 bn to India

The owner of Ulster Bank has agreed to pay the US Department of Justice US$4.9bn (€4.12bn) as part of a settlement. However, as per analysts' opinion, the United States Department of Justice might impose a lawsuit of Dollars 12 billion on RBS for mis-selling the mortgage backed securities.

This meant that the United Kingdom government was unable to sell of any of its shares in the company.

But he stressed the decision on how and when to sell down the stake is "definitely in their (the Government's) hands". That would allow funds that only invest in dividend-paying stocks to invest.

Chancellor Philip Hammond said he welcomed the agreement in principle, saying that, when finalised, it would remove a major uncertainty for the United Kingdom taxpayer. JPMorgan in November agreed to pay $13 billion, the largest settlement in USA history.

Those remaining banks could now expect to pay less than had been estimated - in UBS's case, less than half of the top-end forecast of $5 billion, Elliott Stein, a Bloomberg Intelligence analyst, wrote in a note on Thursday.

RBS, however, cautioned that the settlement was subject to the parties entering into a legally-binding agreement, with no assurance that they would "agree on the final terms of any proposed settlement".

RBS reported its first annual profit in a decade in February, making a profit of £752m in 2017, following a £7bn loss in 2016. The DOJ settlement could clear the way for the government to offload its stake.