RBS reaches $4.9 billion deal to settle United States mortgage bond probe

RBS reaches $4.9 billion deal to settle United States mortgage bond probe

Nomura Holdings may make additional provisions after booking more than 30 billion yen ($275 million) in costs tied to a USA probe into mortgage-bond sales before the crisis, a person familiar with the matter said last month.

RBS had been subject to an investigation by the US Department of Justice (DOJ) over residential-mortgage backed securities and other derivatives.

RBS says $3.46B of the penalty would be covered by existing provisions, with the rest to come from an incremental charge of $1.44B during Q2.

RBS was one of the last banks to reach a settlement with the US government to resolve investigations into its marketing and sale of residential mortgage-backed securities in the run-up to the 2008 financial crisis.

The accord is also expected to mitigate a major litigation issue of RBS that has reportedly complicated the United Kingdom government's long-term plan to sell down its over 70 percent share in the bank.

Britain's Conservative government is meanwhile planning to return RBS to private ownership with the aim of selling £15 billion of its stake by 2023.

The bank spelled out the change to the appeal process for companies allegedly harmed by its GRG unit in a letter to British junior finance minister John Glen seen by Reuters on Thursday. Big shots of the bank seem to be highly positive about the deal, claiming it to be a "milestone".

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UK Chancellor Philip Hammond then said he was reluctant to sell shares while the DOJ probe was still to be resolved.

Those remaining banks could now expect to pay less than had been estimated - in UBS's case, less than half of the top-end forecast of $5 billion, Elliott Stein, a Bloomberg Intelligence analyst, wrote in a note on Thursday.

With (Other OTC: WWTH - news) the penalty paid, RBS can now open talks with United Kingdom regulators about the resumption of dividend payments.

Michael Hewson, chief market analyst at CMC Markets UK, said: "This morning's news that the bank had reached a provisional settlement of $4.9bn has seen the share price surge higher, as the prospect of a significant obstacle that had been hanging over the bank looks finally to have been cleared".

"This is hardly a Silicon Valley company".

RBS however appears to have benefited from settling under the Trump administration, which has been less hostile towards the banking sector than that of his predecessor Barack Obama.

In March, Barclays (bcs) agreed to pay $2 billion to settle its USA probe, securing a penalty less than half of what US authorities originally demanded.

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