The Royal Bank of Scotland Group Plc (RBS) has reached “an agreement in principle” and agreed to pay $4.9 billion to resolve a US Department of Justice investigation into its structuring and sale of mortgage-backed securities before the 2008 financial crisis.
The settlement would remove a major hurdle to the UK government’s plan to sell down its remaining 71% stake in the bailed-out bank.
RBS said that $3.46 billion of the proposed civil settlement will be covered by existing provisions and that RBS will take a $1.44 billion incremental charge in 2018’s second quarter to cover the rest.
RBS CEO Ross McEwan said: “Today’s announcement is a milestone moment for the bank.
“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.”
RBS said the settlement has been agreed in principle but “there can be no assurance” both sides will agree on final terms.
The US Attorney’s Office for the District of Massachusetts confirmed on Twitter that a preliminary deal had been reached.
It tweeted: “The U.S. Attorney’s Office can confirm that it has reached an agreement in principle w/ The Royal Bank of Scotland and certain of its affiliates (RBS) to settle potential civil claims to RBS’s structuring and sale of residential mortgage-backed securities issued b/w 2005 & 2008 …
“Further details remain to be negotiated, however, before a formal agreement can be reached.”