RBS to pay $5.5 billion to settle probe into toxic mortgages
The Royal Bank of Scotland has agreed to pay $5.5 billion to settle claims that it sold toxic mortgages prior to the financial crisis.Posted — Updated
The Royal Bank of Scotland has agreed to pay $5.5 billion to settle claims that it sold toxic mortgages prior to the financial crisis.
RBS has already set aside most of the funds needed to resolve allegations made by the Federal Housing Finance Agency that it packaged and sold risky loans worth over $30 billion to U.S. mortgage giants Fannie Mae and Freddie Mac.
"This settlement is a stark reminder of what happened to this bank before the financial crisis, and the heavy price paid for its pursuit of global ambitions," RBS CEO Ross McEwan said in a statement.
Gains made by RBS shares on Wednesday were wiped out following the announcement.
The bank still faces a separate investigation by U.S. Department of Justice over the sale of risky mortgages.
Related: This taxpayer-owned bank has lost $74 billion in nine years
RBS, formerly the largest bank in the world, was bailed out by the British government in 2008. The government still owns more than 70% of the firm, which has reported nine consecutive years of losses totaling -58 billion ($74.7 billion).
U.K. Treasury chief Philip Hammond said earlier this year that the government is likely to lose billions of pounds when it sells of its stake at the bank.
"Our policy remains to return the bank to private hands as soon as we can achieve fair value for the shares, recognizing that fair value could well be below what the previous Government paid for them," he told parliament in April.
"We must live in the real world," he added.
The bank failed stress tests performed by the Bank of England in November.
Copyright 2023 by Cable News Network, Inc., a Time Warner Company. All rights reserved.