RBS sets aside $4b for US loan mis-selling
The bank, set for 9th straight annual loss, says might have to set aside yet more
Royal Bank of Scotland has taken a £3.1 billion (Dh14.40 billion; $3.92 billion) provision as it prepares to settle claims in the United States that it mis-sold toxic mortgagebacked securities in the run-up to the 2008 financial crisis.
The provision means that state-backed RBS is unlikely to make a profit in 2016, the ninth straight year the bank has failed to make an annual profit.
RBS is preparing to start negotiations with the US Department of Justice over a settlement of the mis-selling claims, the timing of which is still uncertain.
“This bank, and of course the British taxpayers, have paid a very heavy price for the decisions that were made at RBS before the crisis,” RBS Chief Executive Ross McEwan said on a conference call with reporters yesterday.
“Today’s announcement is yet another painful example of that legacy,” he said.
This is the first time RBS has set aside any money to directly cover a settlement with the US Department of Justice over the alleged decades-old mis-selling of mortgage-backed securities.
RBS is the latest European bank that needs to reach a settlement with US authorities. Credit Suisse earlier this month agreed to pay $5.3 billion (Dh19.47 billion) and Deutsche Bank agreed to pay $7.2 billion to settle their respective misselling cases.
2012 initiative
These settlements stem from an initiative launched in 2012 by former US President Barack Obama to hold Wall Street accountable for misconduct in the sale of the securities that helped to trigger the worst economic crisis since the Great Depression.
Analysts have estimated the bank could have to pay the US Department of Justice as much as £9 billion in the next few months. Even the lowest estimate of £2 billion would make it the largest fine in the bank’s history.
RBS said the total misconduct bill for mis-selling these securities might exceed its provisions.