RBS to set aside £3.1bn for US settlement over toxic mortgage securities


The lender, which is still 72 per cent owned by the taxpayer, has announced that it has taken a provision to settle claims made by the Department of Justice (DoJ), a move that will push it to a huge loss, reports The Telegraph.

The bank has not yet entered substantial negotiations with the DoJ over a settlement. However, it is understood that RBS bosses are now confident enough about the potential size of a settlement to make the, although it has cautioned that the eventual bill from the DoJ could be higher.

It comes after Germany’s Deutsche Bank and Swiss lender Credit Suisse agreed to pay a combined $12.5bn to the DoJ to settle similar claims just before Christmas, which will have helped RBS to estimate the size of the provision it should make. Barclays, however, refused to a deal with the US and the DoJ is now taking legal action against the British bank.

The provision will mean RBS, which has been loss-making ever since 2008, will post an even bigger annual loss than analysts had been expecting next month. The bank has now set aside a total of almost $8.3bn to cover US penalties.

Even so, the latest move is nevertheless a sign that RBS boss Ross McEwan is starting to make progress tackling one of the darkest clouds that has been hanging over the bank.

Fears that RBS could be forced to agree to a $12bn-plus settlement for its role selling residential mortgage-backed securities in the US before the credit crunch have unnerved investors in recent months.

The spectre of a huge hit has been so great that Philip Hammond, the Chancellor, said settling with the DoJ was one of two big issues that Mr McEwan must resolve before the Government will sell any more shares in the lender. The other legacy problem was completing the problematic sale of RBS’s Williams & Glyn branch network, which has been demanded by the European Commission.

Mr McEwan said: “Putting our legacy litigation issues behind us, including those relating to RMBS, remains a key part of our strategy. It is our priority to seek the best outcome for our shareholders, customers and employees.”