Once again, Royal Bank of Scotland (RBS) has arrived at yet another securities settlement related to its mortgage practices leading up to the 2008 housing crisis. This time, RBS is getting ready to pay almost $4.9B. The deal, reached with the US Justice Department, must still must be finalized. The DOJ had been investigating allegations that the British bank sold high risk loans between 2005 and 2007.
CNN reports that since the economic crisis, RBS has paid about $28.4B in fines and settlements, including $500M to the state of New York earlier this year to settle allegations of misrepresentations made and deceptive practices used on investors of residential mortgage-backed securities. The bank settled for $5.5B with US Federal Housing Finance Agency last year to resolve allegations that it bundled and sold more than $30B of risky loans to government-sponsored enterprises Freddie Mac and Fannie Mae.
RBS previously reached two settlements with the National Credit Union Administration. One, for $1.1BM in 2016, was over claims that it sold faulty mortgage-backed securities to credit unions. The other, for $129.6M, settled claims tied to alleged losses for corporate credit unions Southwest and Members United bought RMBSs. According to NCUA, RBS made misrepresentations when underwriting and selling the residential mortgage-backed securities.
In a $44M settlement reached with the DOJ and the Special Inspector General for the Troubled Asset Relief Program last year, RBS agreed to pay $9M in restitution and a $35M penalty as part of a nonprosecution deal reached over allegations that it defrauded customers of millions of dollars when it lied about mortgage bond trades involving MBSs, commercial mortgage-backed securities (CMSs), and collateralized loan obligations (CLOs). RBS was accused of trying to enhance its RMBS and CLO profits.
The bank was accused of misrepresentations, lies, deception, cheating, fraudulent trading practices, and concealing the fraud. Among the customers that were harmed: Citigroup Global Markets (C), Barclays Capital (BARC), Goldman Sachs (GS) Asset Management, Merrill Lynch Wealth Management, Morgan Stanley (MS), and others. As part of the deal, RBS admitted to its past behavior.
Other settlements that RBS has reached include $120M in 2016 with the state of Connecticut over alleged toxic RMBS sales and a $125M mortgage bond fraud settlement last year with the state of California, which alleged misrepresentations involving the mortgages underlying the bonds purchased by CalSTRS and CalPERS. The state teacher pension funds allegedly lost millions of dollars as a result.
RBS Reaches $4.9B Deal to Settle US Mortgage Bond Investigation, Reuters, May 9, 2018