News Worms
News Worms


RBS share price: Group reaches United States mortgage bonds settlement

RBS share price: Group reaches United States mortgage bonds settlement

Royal Bank of Scotland Group PLC said Wednesday it has agreed a USD5.50 billion settlement with the US Federal Housing Finance Agency over claims the lender mis-sold residential mortgage-backed securities.

The settlement relates to approximately USD32.0 billion in mortgage-backed securities which were issued by RBS before the 2008 crisis.

It has also been a major hurdle to the bank's return to private hands, with the Government having said the United States mis-selling claims need to be resolved before it can start to sell its shares in the lender.

Under the terms of the settlement, RBS will be reimbursed US$754m of the US$5.5bn related to "indemnification agreements with third parties".

Ross McEwan, chief executive of RBS, told reporters: 'It is never a great experience for a chief executive to be writing such a large cheque. but unfortunately that is the price we are paying to get this organisation into a much better shape. The bank has reserved a further US$3.7bn for this and related outstanding charges.

Mr McEwan is seeking to draw a line under legacy issues for RBS, which is still 71% owned by the Government following its £45.5 billion bailout at the height of the financial crisis.

The case against RBS is the biggest and last of 18 lawsuits the FHFA filed in 2011 over about $200 billion in mortgage-backed securities that various banks sold to US mortgage giants Fannie Mae and Freddie Mac. 'The settlement removes a major uncertainty surrounding RBS's capital resources, ' he said. The companies received taxpayer aid totaling $187 billion.

The bank still faces a separate investigation by U.S. Department of Justice over the sale of risky mortgages.

The settlement agreement resolves all claims in the lawsuit FHFA v.

The FHFA contended that in buying the mortgage-backed securities from RBS, Fannie Mae and Freddie Mac relied on false and misleading statements contained in offering documents, leading them to suffer massive losses. The bank is not required to offer an admission of guilt as part of this settlement. "RBS shares are now trading at around half the price the taxpayer needs to break even on the bailout, which means a return to private hands is still a long way off".

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