RBS is swallowing a 'milestone' $4.9 billion fine for its role in the financial crisis — and shares are going up | México News Network

RBS is swallowing a ‘milestone’ $4.9 billion fine for its role in the financial crisis — and shares are going up

Royal Bank of Scotland has agreed a fine to settle charges of wrongdoing in the US that contributed to the financial crisis.

By Redacción MXN Saturday, May 12, 2018 comments

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Royal Bank of Scotland has agreed a fine to settle charges of wrongdoing in the US that contributed to the financial crisis.

 

RBS announced on Thursday it has reached a deal with the US Department of Justice to pay a civil penalty of $4.9 billion to settle allegations of misselling mortgage-backed securities in the US between 2005 and 2007. These complex debt products, which were underpinned by bundled of mortgages, were one of the key triggers of the crisis.

 

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$3.4 billion will be covered by existing provisions set aside by the bank to cover the fine and the remaining $1.4 billion will be booked as a second-quarter charge.

 

RBS shares jumped as much as 6% at the open in London.

 

While the share jump may seem counterintuitive, the fine brings resolution to an issue that has long hung over RBS and is also not as bad as some feared. Last year investors worried that the bank could be hit with a fine as big as $10 billion for its actions in the run-up to the crisis.

 

RBS CEO Ross McEwan called the settlement “a milestone moment for the bank.”

 

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“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,” he said. “Removing the uncertainty over the scale of this settlement means that the investment case for this bank is much clearer.”

 

While the settlement has been agreed in principle, RBS said that a legally binding agreement has yet to be signed.