The Royal Bank of Scotland (RBS), a United Kingdom banking group, has reached an agreement with U.S. lawmakers to pay $4.9 billion to settle an investigation into its USA mortgage bond services. The group has already booked $3.46 billion for the settlement, noting that it would take a $1.44-billion charge in its second-quarter results.
The accord would resolve a major issue that has weighed on the company's share price and complicated the United Kingdom government's plan to sell down its more than 70 percent stake in the bank.
Neil Wilson, chief market analyst at trading platform Markets.com, said: "This removes the last great barrier to the government selling off its stake and we would envisage that the chancellor will expedite the disposal of its 71% shareholding".
The department has been examining RBS's issuance and underwriting of U.S. residential mortgage-backed securities (RMBS) between 2005 and 2007.
The bank warned that the agreement was subject to the Department of Justice (DOJ) and RBS entering into a legally binding agreement.
However, the preliminary settlement still needs to be finalised, with further details set for more negotiation.
"Removing the uncertainty over the scale of this settlement means that the investment case for this bank is much clearer", he said.
Rivals also charged by the DoJ include Citigroup, JPMorgan Chase, Credit Suisse, Morgan Stanley, Goldman Sachs and Bank of America. The British government insisted that the USA claims had to be resolved before it could sell its 72 percent stake in RBS.
RBS in July 2017 agreed to pay $5.5 billion to resolve a lawsuit by the U.S. Federal Housing Finance Agency which claimed it misled the U.S. mortgage giants Fannie Mae and Freddie Mac into buying mortgage-backed securities.
Recently, RBS also resolved investigations by the state attorneys general of California and NY for $125 million and $500 million, respectively.