Royal Bank of Scotland Group (LON:RBS) has agreed to pay $500 million to settle a New York probe into its marketing of toxic mortgage-backed securities in the run-up to the financial crisis. The fine comes after the bailed-out lender recently disclosed that it had made its first annual profit in a decade.
RBS’ share price lost ground in the previous session, shedding 0.57 percent to close at 260.10p. The shares underperformed the broader UK market, with the benchmark FTSE 100 index adding 30.77 points to end the session 0.43 percent higher at 7,146.75.
RBS settles New York probe
New York Attorney General Eric Schneiderman announced the $500-million settlement with RBS yesterday, noting that the lender had agreed to pay $100 million in cash to New York State and $400 million worth of consumer relief for New York homeowners and communities. The settlement refers to “the bank’s deceptive practices and misrepresentations to investors in connection with the packaging, marketing, sale, and issuance of residential mortgage-backed securities leading up to the financial crisis”.
RBS marks the sixth large financial institution to settle with Attorney General Schneiderman’s office since he was appointed co-chair of the RMBS Working Group by President Obama in 2012.
Justice Department fine still pending
Bloomberg noted in its coverage of the news that the deal had boosted the lender’s US settlement costs so far to $6 billion in less than a year for bundling dubious mortgages into top-rated securities and pitching them to investors in 2006 to 2008, before the housing bubble burst. RBS, however, still has to settle a probe with the US Department of Justice, and is thought to be moving closer to a fine. Last month, the lender disclosed that it had booked another £442 million for the fine, taking its total provision for upcoming settlements to £3.2 billion.