The US Justice Department announced late on Tuesday it finally reached a $4.9 billion settlement with The Royal Bank of Scotland Group plc (RBS) “resolving federal civil claims that RBS misled investors in the underwriting and issuing of residential mortgage-backed securities (RMBS) between 2005 and 2008.”
The penalty is the largest imposed by the Justice Department for financial crisis-era misconduct at a single entity under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.
The settlement removes a major hurdle to the UK government’s plan to sell down its remaining 62.4% stake in RBS, which was acquired for the UK taxpayer via a £45.5 billion state bailout during the financial crisis.
The Justice Department said RBS disputes the allegations and does not admit wrongdoing.
“There is no place for the sort of unacceptable behavior alleged by the DoJ at the bank we are building today,” said RBS CEO Ross McEwan.
RBS also said it would be paying out an interim ordinary dividend of 2p per share on October 12 to shareholders.
The dividend is the bank’s first since its bailout in 2008.
Acting Associate Attorney General Jesse Panuccio said: “This settlement holds RBS accountable for serious misconduct that contributed to that financial crisis, and it sends an important message that the Department of Justice will pursue financial institutions that illicitly harm the American economy and our consumers.”
Andrew E. Lelling, U.S. Attorney for the District of Massachusetts, said: “This resolution – the largest of its kind – holds RBS accountable for defrauding the people and institutions that form the backbone of our investing community.
“Despite assurances by RBS to its investors, RBS’s deals were backed by mortgage loans with a high risk of default.
“Our settlement today makes clear that institutions like RBS cannot evade responsibility for the damage caused by their illicit conduct, and it serves as a reminder that the Justice Department, and this Office, will hold those who engage in fraudulent conduct accountable.”
The Justice Department added: “These are allegations only, which RBS disputes and does not admit, and there has been no trial or adjudication or judicial finding of any issue of fact or law.”