RBS agrees to pay $1.1bn to settle miss-selling mortage claim

The Royal Bank of Scotland (RBS) agreed to pay $1.1bn (£846) to settle two legal claims that it allegedly miss-sold mortgage securities in the run-up to the 2008 financial crisis.

The settlements, involving its subsidiary RBS Securities, are with the US National Credit Union Administration (NCUA) board, which regulates credit unions, but does not include lawsuits with the Department of Justice and the Federal Housing Finance Agency.

RBS did not admit any fault as part of the agreement.

The bank, which received a £45bn bailout in 2008, said payment was “substantially covered by existing provisions”, which totalled £3.8bn at 30 June and will not impact its core capital ratio.

RBS is defending about 15 lawsuits in the US and last year agreed to pay $129.6bn to settle a separate case with the NCUA.

So far, the NCUA has gained $4.3bn in settlements from several lawsuits over miss-sold mortgage securities, which are used to pay claims against five failed credit unions.

Broker Shore Capital said the outstanding claims by the Federal Housing Finance Association and the investigations by the US Department of Justice could result in a “substantially larger” payment which is yet to be provided for.

The broker added that the recent revelation that Deutsche Bank has been asked to pay $14bn to settle a similar issue has raised concerns in the market about the read across to RBS, although Deutsche Bank has made it clear that it does not plan to pay the $14bn, and said that similar “large penalties levied against other banks have subsequently been re-negotiated down”.

Shares in RBS were up 1.26% to 176.80 at 0832 BST.