Royal Bank of Scotland to pay $4.9bn US subprime fine

London (AFP) –


Britain's state-rescued Royal Bank of Scotland said Thursday that it has been fined $4.9 billion (4.1 billion euros) by the US Justice Department over its role in the subprime crisis.

The announcement comes almost a decade after the alleged mis-selling of toxic mortgage-backed securities that precipitated the 2008 financial meltdown.

RBS is one of the last major banks to settle with US regulators over the notorious global financial crisis -- which sparked a fierce worldwide recession, millions of job losses, and multi-billion-dollar bank bailouts that gave way to years of state austerity.

Rival British bank Barclays had already reached a $2.0-billion settlement with US regulators, while Germany's Deutsche Bank and Swiss pair UBS and Credit Suisse have agreed similar crisis-related fines.

- Crisis-related fines -

"The Royal Bank of Scotland Group plc today announces that it has reached a civil settlement in principle with the US Department of Justice (DOJ) to resolve its investigation into RBS's issuance and underwriting of US residential mortgage-backed securities between 2005 and 2007," RBS said in a statement.

However, the preliminary settlement still needs to be finalised, with further details set for more negotiation.

Edinburgh-based RBS remains 71 percent owned by the British government after receiving the world's biggest banking bailout at the height of the crisis.

"Today's announcement is a milestone moment for the bank," said chief executive Ross McEwan.

"Reaching this settlement in principle with the US Department of Justice will, when finalised, allow us to deal with this significant remaining legacy issue and is the price we have to pay for the global ambitions pursued by this bank before the crisis.

"Removing the uncertainty over the scale of this settlement means that the investment case for this bank is much clearer."

The lender added that $3.46 billion of the settlement will be covered by existing provisions, while it will take another $1.44billion charge for the second quarter of 2018.

The DOJ settlement follows a separate fine of $5.5 billion that RBS agreed in July 2017 with the Federal Housing Finance Agency over the same matter.

The settlements have weighed heavily on the bank amid fears over their size.

- Resurgence -

Britain's Conservative government had announced last year that it planned to return RBS to private ownership with the aim of selling £15 billion of its stake by 2023.

However, it had said the subprime claims needed to be resolved before it could start selling down its holding.

In recent years, RBS has enjoyed a resurgence in its performance.

In February it posted its first annual bottom-line profit since 2007, the eve of the global financial crisis, following a huge drop in litigation costs.

And the bank revealed late last month that first-quarter net profits more than tripled on lower restructuring costs and rising income.

Earnings after taxation surged to £792 million ($1.1 billion, 911 million euros) in the first three months of this year.

That easily beat analysts' consensus forecasts and compared to a £259-million profit in the same period of 2017.