Royal Bank of Scotland agrees to pay $4.9 billion to settle probe by the U.S. Justice Department

The bulk of the $4.9 billion settlement amount has already been provisioned for; as for the balance amount of $1.44 billion, RBS has agreed to take an incremental charge in 2018’s second quarter.

The Royal Bank of Scotland Group Plc stated it has agreed to shell out $4.9 billion to resolve a U.S. Department of Justice probe into its sale and structuring of mortgage-backed securities ahead of the 2007-2009 financial crisis.

Of the $4.9 billion, RBS stated $3.46 billion is covered by existing provisions and the bank will a $1.44 billion incremental charge in 2018’s second quarter to cover the balance amount.

The agreement is likely to resolve issues surrounding the company, including the UK government’s plan to sell its, more than 70%, stake in the bank.

Ross McEwan, RBS’ CEO termed the deal a “milestone.”

“Removing the uncertainty over the scale of this settlement means that the investment case for this bank is much clearer,” said McEwan in a statement.

The U.S. Attorney’s Office in Massachusetts, which led the probe, has confirmed that it has, in principle come to an agreement with RBS which will potential resolve civil claims related to the mortgage-backed securities that were issued from 2005 to 2008.

“Further details remain to be negotiated, however, before a formal agreement can be reached,” said the U.S. Attorney’s Office in Massachusetts.

Incidentally, the U.S. Attorney’s Office in Massachusetts was also conducting a criminal investigation into RBS which includes former employees who were involved in structuring and selling the securities.

The settlement, disclosed on Thursday, is only civil in nature, thus signaling that criminal charges are not likely to be pursed by the investigators.

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