RBS agrees 'milestone' £3.6bn U.S. fine over subprime lending

Scotland branch is seen in central London

The Royal Bank of Scotland has reached a tentative deal with the U.S. Department of Justice, reportedly worth $4.9 billion, to settle potential civil claims over the bank's structuring and sale of residential mortgage-backed securities before the financial crisis, the agency confirmed Wednesday.

Of the $4.9bn, $3.46bn will be covered by existing provisions, with an incremental charge of $1.44bn in the second quarter of 2018, a statement from RBS said.

In March, Barclays agreed to pay US$2 billion to settle its U.S. probe, securing a penalty less than half of what United States authorities originally demanded.

Deutsche Bank AG and Citigroup Inc. were assessed much smaller FHFA penalties than Bank of America or RBS but paid about $7 billion each to the Justice Department.

RBS's proposed deal looks to be welcome news for HSBC, UBS and Wells Fargo, among the last remaining big banks with unresolved USA investigations over mortgage-backed securities.

The government bailed out RBS after the 2007 to 2008 financial crisis when, by some measures, it was the biggest bank in the world.

As of 08:36 BST, RBS' share price had added 4.49 percent to 288.50p, outperforming the broader United Kingdom market, with the benchmark FTSE 100 index now standing 0.11 percent higher at 7,671.13 points.

McEwan said the deal "makes it easier for the Government to have a clean bank to sell".


"This will help the Government to sell a cleaner bank".

In a statement, RBS said the proposed settlement is subject to the DOJ and RBS entering into a legally-binding agreement, "and there can be no assurance that the parties will agree on the final terms of any proposed settlement".

Chancellor Philip Hammond said the agreement "marks another significant milestone in RBS's work to resolve its legacy issues, and will help pave the way to a sale of taxpayer-owned shares".

The bank has paid nothing for ten years.

RBS has already paid mortgage-related penalties of $5.5 billion to the FHFA, $1.25 billion to the National Credit Union Administration, $500 million to the NY attorney general's office and $150 million to the Securities and Exchange Commission.

In analysts report revealed to investors this morning, Shore Capital kept their "Hold" rating on Royal Bank of Scotland Group The PLC (LON:RBS) shares.

RBS is also expected to resume dividend payouts to shareholders following the 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.

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