RBS agrees $4.9bn U.S. fine in 'milestone moment'

Positive Media Coverage Somewhat Unlikely to Impact Royal Bank of Scotland (NYSE:RBS) Share Price

The Royal Bank of Scotland (RBS), a United Kingdom banking group, has reached an agreement with USA lawmakers to pay $4.9 billion to settle an investigation into its U.S. mortgage bond services. However, the agreement that was disclosed by the US government and RBS conjointly this Thursday, is reported to be absolutely civil in nature, with a clear indication of no criminal charges in the near future.

The taxpayer-backed lender said the penalty with the US Department of Justice (DoJ) was a "milestone" for the group, ending a long-running probe and paving the way for the Government to relaunch plans to sell its 72 per cent stake in the bank.

"The number is a firm number", finance director Stevenson said.

RBS said 3.46 billion USA dollars (£2.5 billion) of the proposed civil settlement will be covered by existing provisions and the bank will take a 1.44 billion U.S. dollar (£1.1 billion) hit in its second quarter results.

The Royal Bank of Scotland (RBS) has been fined nearly $5bn by the US Department of Justice (DoJ) relating to its role in the subprime crisis.

The widening of the appeal process shows RBS still grappling to deal with past misconduct issues on the same day it reached a $5 billion settlement with US authorities over its sale of mortgage bonds.

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The prospect of a heavy fine by USA authorities made the government reluctant to sell shares in the bank bailed out by United Kingdom tax payers after the 2008 financial crisis. The British government announced in November that it planned to sell off £3 billion ($4.07 billion) worth of RBS shares in the 2018-2019 fiscal year and it looks as if those plans will now go ahead. Big shots of the bank seem to be highly positive about the deal, claiming it to be a "milestone".

The US Department of Justice said further details must be negotiated with RBS before a final deal is done. He described a new policy in which USA prosecutors will work closely with their counterparts in other enforcement agencies to coordinate penalties, with the Justice Department adjusting its assessments to account for other fines.

However, one of the bank's largest 20 investors said shareholders should be cautious about the prospects of getting their hands on the bank's excess capital just yet.

"This is hardly a Silicon Valley company".

RBS however appears to have benefited from settling under the Trump administration, which has been less hostile towards the banking sector than that of his predecessor Barack Obama. Some analysts predicted RBS might have to pay up to $12 billion.

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