Royal Bank Of Scotland Sets Aside Nearly $4 Billion To Settle US DoJ Case

Josh O'Neill

27 January 2017

has set aside a further £3.1 billion ($3.9 billion) as it prepares to settle claims in the US that it mis-sold toxic mortgage-backed securities in the run up to the 2008 financial tsunami, raising its total provisions for the case to £6.7 billion.

The colossal provision means that the government-backed bank - the parent of private bank announcement is yet another painful example of that legacy,” he reportedly added.

This is the first time RBS has allocated any money to directly cover a settlement with the US DoJ over the alleged mis-selling of mortgage-backed securities.

“The sins of the past still loom large in the present for RBS, and the cost of US litigation is the biggest in a long line of problems besetting the bank at the moment,” commented Laith Khalaf, senior analyst at Hargreaves Lansdown.

It does the bank no favors that the fine will be imposed in dollars, as the currency has risen by 15 per cent against sterling since the EU referendum, Khalaf added.

“The additional provisions will take a toll on the bank’s balance sheet, which it was already busy repairing after it failed a Bank of England stress test last November. RBS is heading in the right direction, but progress is slow, profitability is elusive, and a return to private ownership is in the long grass,” he said.

Earlier this month, Credit Suisse agreed to pay $5.3 billion to settle its respective case.

The settlements stem from an initiative sparked by former US President Barack Obama to hold Wall Street accountable for misconduct that helped trigger the worst economic crisis since the 1930s.