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RBS agrees to pay $5.5bn to settle US mortgage probe

Royal Bank of Scotland (RBS) has agreed to pay $5.5bn to settle probes related to the firm’s sale of mortgage-backed securities in the US.

The lender has made a settlement with the US Federal Housing Finance Agency (FHFA) to resolve claims related to RBS's issuance and underwriting of about $32bn residential mortgage-backed securities (RMBS) before the 2008 recession.

Out of the $5.5bn settlement payment, about $754m will be reimbursed to RBS under indemnification agreements with third parties. 

This amount, according to the company, will be largely covered using its existing provisions and an incremental charge of $196m will be recorded in the second quarter results, which are scheduled to be published in early this August.

Royal Bank of Scotland CEO Ross McEwan said: “Today’s announcement is an important step forward in resolving one of the most significant legacy matters facing RBS and is further evidence of the determination of the bank’s leadership to put our remaining issues behind us.

“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 is one of 17 financial firms that have settled RMBS claims filed by FHFA. 

Earlier, several other global banks have also agreed to pay billions of dollars to settled mortgage claims with the regulators.

In January, German banking giant Deutsche Bank has finalized a $7.2bn deal with the US Department of Justice to end several probes related to the firm’s sale of mortgage-backed securities.

Image: RBS building London. Photo: Courtesy of Royal Bank of Scotland.