Royal Bank of Scotland has agreed to pay $4.9 billion to settle charges that it misled investors with residential mortgage-backed securities it sold in the run-up to the 2008 financial crisis, the US Department of Justice said on Tuesday.
The final deal is lower than the $12 billion sum that US authorities had asked RBS, once the world’s largest bank by assets, to pay earlier in negotiations, as reported back in 2016.
The suit against RBS is part of a against major banks, which allegedly did not disclose problems with the mortgage-backed securities that would ultimately cause major losses.
As part of the settlement, Britain’s state-rescued lender acknowledged that home loans it pooled into the securities did not meet underwriting guidelines and that it knew it was peddling investments that were likely to fail.
Before the RBS deal, US regulators had already fined several more than $60 billion over their dealings in mortgage-backed securities. Bank of America Corp., which had the largest such settlement, agreed to pay $16.7 billion over its sale of toxic mortgage securities, split between cash and consumer relief.
The deal marks a significant milestone for the British bank as it clears the biggest legal issue that didn’t allow the lender to go ahead with its restructuring efforts including return of cash to UK taxpayers who bankrolled its post-crisis survival.
In 2017, to resolve a lawsuit by the U.S. Federal Housing Finance Agency accusing the bank of mis-selling billions of dollars in mortgage-backed securities before the global financial crisis.
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