RBS settles with US Securities and Exchange Commission for US$153.7 million over mortgage-backed securities
The Royal Bank of Scotland has reached a US$153.7 million settlement with the US Securities and Exchange Commission over an investigation into its mortgage-backed securities.
In a statement on Thursday, RBS said the cost of the payments has been covered by provisions already made but that the terms of the settlement meant it neither admitted nor denied the allegations from the SEC that its prospectus for a 2007 securities offering was “materially misleading”.
The settlement is the latest in a series of SEC actions against banks over their sales of risky mortgage-linked securities to investors in the years preceding the 2008 financial crisis.
When the real estate bubble burst in 2007, home values plunged and millions of people defaulted on their mortgages and lost their homes.
Investors who bought the risky mortgage securities lost billions, a shock that laid the ground for the financial crisis and the deepest global recession since the second world war.
Other banks that have settled with the SEC include Goldman Sachs, which agreed in July 2010 to pay US$550 million. And following SEC charges, JPMorgan Chase, the largest US bank by assets, agreed to pay US$153.6 million in June 2011 and a further US$296.9 million in November last year. Citigroup has agreed to pay US$285 million.
Meanwhile, JPMorgan has been negotiating for weeks with the US Justice Department over a settlement of allegations regarding the bank’s sales of mortgage securities.
The bank has tentatively agreed to pay US$13 billion, which would be the largest penalty the government has extracted from a company for actions related to the financial crisis.
