RBS pays $US1.1bn to settle GFC-related suits in US

The bank has put to bed two civil claims over mortgage-backed securities sales ahead of the GFC.

Royal Bank of Scotland Group PLC has agreed to pay $US1.1 billion to a US regulator to resolve two civil lawsuits over the way it sold mortgage-backed securities in the run-up to the financial crisis.

The UK lender said the settlement with the National Credit Union Administration Board is substantially covered by existing provisions and will have no material impact on its common equity Tier 1 ratio — a measure of high-quality capital as a share of risk-weighted assets.

However, the bank continues to face other claims over the alleged mis-selling of mortgage-backed securities before its £45.5bn ($US59.22bn) government bailout in 2008.

RBS remains under investigation by the US Justice Department, and the bank said additional provisions in future periods could be “materially in excess” of those existing as of June 30.

The development comes less than two weeks after the US Justice Department proposed Deutsche Bank AG pay $US14 billion to settle a set of high-profile mortgage-securities probes stemming from the financial crisis. However, the German lender has said it wouldn’t pay anywhere close to that figure and that it intends to manage its challenges by itself.

Big US banks have also paid multibillion-dollar settlements for allegedly misleading investors about the quality of such securities.

The largest so far has been $US16.65bn paid by Bank of America Corp in 2014. Goldman Sachs Group agreed in April to a $US5bn deal that included a $US2.4bn cash penalty plus a pledge of $US1.8bn to help struggling borrowers and communities hard hit by the 2008 collapse in home prices.

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