Regulation  

RBS strikes £3.6bn deal to end US investigation

RBS strikes £3.6bn deal to end US investigation

The Royal Bank of Scotland has reached a $4.9bn (£3.6bn) settlement with the US Department of Justice over its actions in the run-up to the financial crisis.

The settlement could pave the way for the British government to begin selling its stake in RBS again, which currently amounts to 71 per cent of the business.

US investigators had been examining RBS's issuance and underwriting of residential mortgage-backed securities between 2005 and 2007.

Philip Hammond, chancellor, had recently said he was reluctant to sell shares in the bank before this investigation had been completed.

Ross McEwan, chief executive of RBS, said: "Today's (10 May) announcement is a milestone moment for the bank. 

"Reaching this settlement in principle with the US Department of Justice will, when finalised, allow us to deal with this significant remaining legacy issue and is the price we have to pay for the global ambitions pursued by this bank before the crisis.

"Removing the uncertainty over the scale of this settlement means that the investment case for this bank is much clearer."

RBS stated it had already set aside $3.46bn (£2.55bn) towards the fine but the bank warned the fine would reduce its common equity tier one ratio - which measures a bank's capital strength - by 50 basis points to 15.1 per cent.

The government bailed out RBS after the 2007 to 2008 financial crisis when, by some measures, it was the biggest bank in the world.

Earlier this year RBS reported its first annual profit for a decade, making £752m during 2017.

damian.fantato@ft.com