RBS is to pay a $5.5bn settlement to the US Federal Housing Finance Agency or misselling toxic mortgage bonds in the run-up to the financial crisis.
It relates to sales to US government-backed loan firms Fannie Mae and Freddie Mac prior to the 2008 financial crisis, when RBS was among the biggest players on Wall Street.
RBS said that while it had largely made enough provision for the Federal Housing Finance Agency (FHFA) penalty, it would take an additional charge in its second quarter of £151m to cover the cost.
As per the statement from RBS chief executive, 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.”
The bank has largely already provided for the settlement. It put aside £6.6bn to cover the cost of misselling so-called residential mortgage backed securities (RMBS) and the penalty from FHFA accounted for £3.6 bn of this.
RBS shares were 2% up on the news as shareholders saw the penalty as another step towards the bank’s recovery. It remains more than 70% owned by the public purse as rival Lloyds is back in private hands.