RBS bank has been delivered a £846m ($1.1bn) fine, after investigations into its involvement in causing the 2008 financial crash.
The fine is to be one of three scheduled, after extensive investigations conducted by the National Credit Union Administration (NCUA) board. This most recent fine is however, included within the stipulated £3.8bn that the bank had already allocated to address impending litigation. More penalties are nonetheless to be expected, as negotiations with the NCUA are set to continue into the new year.
Speaking about the settlement with the NCUA, RBS emphasised that it may be necessary to undertake extra provisions. The Bank stated that, in response to “investigations by the civil and criminal divisions of the US Department of Justice and various other members of the RMBS working group of the financial fraud enforcement task force… RMBS litigation and investigations may require additional provisions in future periods that in aggregate could be materially in excess of the (current) provisions,”.
RBS has been thus penalised for its involvement in mis-selling mortgage-backed securities in the lead up to 2008. RBS sold the securities to two credit unions, which collapsed following the US housing market crash. However, the fine does not include an admission of fault for these activities.
This is after an initial worrisome plunge in Deutsche Bank shares, following market anxieties about the scale of the fine to be issued by the Department of Justice. The DOJ ultimately issued a $14bn penalty to Deutsche Bank, for its similar activity involving mortgage-backed securities. However, today, Deutsche bank stock rebounded by just over 3%.
Nevertheless, RBS have felt the effects of Deutsche Bank’s plunge, closing at around 175p. This is significantly below the average price paid by taxpayers of 502p. Taxpayers continue to own a 73% stake in the Scottish Bank, following extensive bailout measures undertaken by the Government following the crash.