Royal Bank of Scotland (RBS) has agreed to pay $5.5bn in fine to settle claims of misselling residential mortgage-backed securities (RMBS) in the US before the global financial crisis.

The settlement with the Federal Housing Finance Agency (FHFA) relates to $32bn of toxic mortgage securities, which were sold to mortgage giants Fannie Mae and Freddie Mac between 2005 and 2007. RBS will pay $4.52bn to Freddie Mac and nearly $975m to Fannie Mae as part of the settlement agreement.

The bank will however be reimbursed $754m under agreements made with third parties, thereby lowering the overall settlement cost.

The recent fine will be mainly covered by existing provisions, RBS said. The bank will also take a $196m charge in its second quarter results owing to the settlement.

RBS CEO Ross McEwan said: “Today’s announcement is an important step forward in resolving one of the most significant legacy matters facing RBS and is further evidence of the determination of the bank’s leadership to put our remaining issues behind us.”

“This settlement is a stark reminder of what happened to this bank before the financial crisis, and the heavy price paid for its pursuit of global ambitions.”

How well do you really know your competitors?

Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.

Company Profile – free sample

Thank you!

Your download email will arrive shortly

Not ready to buy yet? Download a free sample

We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form

By GlobalData
Visit our Privacy Policy for more information about our services, how we may use, process and share your personal data, including information of your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.