RBS $44m settlement in US mortgage bond case

US Attorney Deirdre Daly

Royal Bank of Scotland Group has agreed to pay more than $44 million and enter a non-prosecution agreement to settle a US Department of Justice criminal probe of traders accused of defrauding customers on mortgage-backed bond prices.

This settlement is separate from a multi-billion dollar penalty that RBS is expected to face in the US for mis-selling mortgage-backed securities before the 2008 financial crisis.

The $44 million settlement with RBS Securities Inc was announced on Thursday by US Attorney Deirdre Daly in Connecticut.

RBS will pay a $35 million fine, plus at least $9.09 million to more than 30 customers.

An RBS spokesperson said: “Having identified misconduct and self-reported the matter to the authorities, RBS has extensively cooperated with this investigation …

 “Two former managing directors have pled guilty, and RBS has zero tolerance for market misconduct. We will pay restitution to all impacted customers.”

Daly said: “For years, RBS fostered a culture of securities fraud.

“Those in a position of authority taught and encouraged fraudulent trading practices.

“Worse, those supervisors and compliance personnel then took steps to prevent victims and honest RBS employees from discovering and exposing the scheme.

“After our joint investigation into fixed income trading began, RBS saw the error of its ways.

“RBS was able to avoid criminal charges in this case only because of its voluntary self-reporting and extraordinary cooperative efforts.

“By entering into this agreement, RBS has admitted the seriousness of its past criminal conduct and made a clean break.

“This is another step in our continuing joint effort to make clear to broker-dealers that lying to customers to increase profits is a crime, and that only by rooting out and reporting such misconduct on their own trading floors can they avoid significant criminal liability.”