RBS to pay £4.2bn fine over USA mortgage-backed securities

Royal Bank Of Scotland Group: Settlement Reached With The Federal Housing Finance Agency Regarding US RMBS Claims

Shares in Royal Bank of Scotland (RBS) have fallen after the bank agreed to pay £4.2 billion to settle a claim brought against it by U.S. regulators, relating to selling mortgage-backed securities.

The FHFA accused RBS of mis-selling US$32bn private-label mortgage-backed securities to the mortgage finance giants, now operating under conservatorship, before the global financial crisis.

Ross McEwan, chief executive of RBS, said it was " an important step forward in resolving one of the most significant legacy matters facing RBS".

FTSE 100-listed RBS will be reimbursed USD754.0 million of the settlement under third parties, leaving it with a net cost of USD4.75 billion.

Shares of Royal Bank Scotland PLC (RBS) traded down 1.36% on Friday, reaching $6.53. The bank said the settlement was largely covered by its existing litigation provisions, but that it would take an additional charge of $196 million in the second quarter.

The Federal Housing Finance Agency sued 18 major USA and foreign banks in 2011 over their sales of mortgage securities to Fannie and Freddie. The settlement with RBS represents settlement of the seventeenth case of those filed by FHFA.

It has also been a major hurdle to the bank's return to private hands, with the Government having said the U.S. mis-selling claims need to be resolved before it can start to sell its shares in the lender.

As previously disclosed, RBS continues to cooperate with RMBS related investigations and proceedings (both formal and informal) by federal and state governmental law enforcement and other agencies including the US Department of Justice ("DOJ") and various other members of the RMBS Working Group of the US Financial Fraud Enforcement Task Force.

RBS, formerly the largest bank in the world, was bailed out by the British government in 2008. The bank must still resolve outstanding civil and criminal claims with the Department of Justice.

The government still owns 72% of RBS.

RBS' share price has given up some of its earlier gains in afternoon trade and was standing 0.39 percent higher at 257.50p as of 14:27 BST, underperforming the broader United Kingdom market, with the benchmark FTSE 100 index now standing 1.11 percent higher at 7,411.05 points.

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