RBS settles probe for $4.9 billion

If HSBC Holdings, UBS Group and Wells Fargo & Co. were concerned that the Trump administration might continue the big-ticket bank penalties of the Obama era, there are mounting signs that they need not be.

Royal Bank of Scotland Group says it has reached a tentative deal with the U.S. Justice Department to pay $4.9 billion to resolve an investigation into its sale of toxic mortgage-backed securities a decade ago. The Justice Department, without citing a figure, confirmed a pact was near.

The RBS penalty would be about half of what many analysts had expected the bank to pay. Those estimates were based, in part, on the size of the bank’s mortgagebacked securities portfolio, which was larger than most. An RBS deal for less than $5 billion would be the first time that a bank’s mortgage settlement with the Justice Department was lower than its penalty to the Federal Housing Finance Agency, according to Bloomberg Intelligence.

RBS’s proposed deal looks to be welcome news for HSBC, UBS and Wells Fargo, which are among the last big banks with unresolved U.S. investigations over mortgage-backed securities. The global banking giants that previously reached settlements with the Justice Department racked up overall penalties of more than $45 billion.

Those remaining banks could expect to pay less than had been estimated — in UBS’ case, less than half of the top-end forecast of $5 billion, Elliott Stein, a Bloomberg Intelligence analyst, wrote in a note Thursday.

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 New York attorney general’s office and $150 million to the Securities and Exchange Commission.