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RBS Settlement Delayed Thanks to DoJ Shakeup

Money Four BHThe Royal Bank of Scotland (RBS) may have a brief reprieve from paying settlements between it and the U.S. government following the firing of the acting Attorney General Sally Yates.

President Donald Trump replaced Yates on January 30 when she refused to defend his travel ban on citizens of seven Muslim countries. As head of the U.S. Department of Justice, she was in charge of any potential settlement with the U.K. based bank in connection to its sale of toxic mortgage-backed securities (MBS) leading up to the 2008 financial crisis.

Trump’s pick for Attorney General, Jeff Sessions, will face his confirmation vote on Wednesday. Following Yates’ termination, Dana Boente is the current acting Attorney General.

RBS announced January 26 it plans to set aside an additional $3.8 billion in preparation to settle those claims according to Business Insider, though following the firing of Yates any potential timeline could be delayed. No date had been announced for any settlement, though the bank made the provision public well ahead of its Full Year 2016 results announcement set for February 24.

The bank has not made any announced changes to those provisions following the abrupt change in leadership at the Department of Justice.

The bank was one of 18 financial institutions sued by the by the Federal Housing Finance Agency (FHFA) in 2011 to recoup U.S. taxpayer costs following the government's $187.5 billion bailout of Fannie Mae and Freddie Mac in 2008.

Most recently RBS settled for $85 million in regards to charges by the Commodity Futures Trading Commission that its traders tried to manipulate a critical benchmark in the interest rate swaps market for more than five years.

RBS has set aside a total of $8.3 billion in litigation “provisions” to date.

"Putting our legacy litigation issues behind us, including those relating to RMBS, remains a key part of our strategy,” said Ross McEwan, CEO of the UK-based bank. “It is our priority to seek the best outcome for our shareholders, customers and employees."

The provision will reduce RBS’s Q3 2016 CET 1 capital ratio to 13.6 percent.

Business Insider  reports that the new provision makes it unlikely RBS will post a profit for 2016, the ninth straight year the bank has failed to do so.

About Author: Phil Banker

Phil Banker began his career in journalism after graduating from the University of North Texas. He has covered a number of communities across Texas and southern Oklahoma, writing news and sports for publications including the Ardmoreite, Ennis Daily News and the Plano Star-Courier. He is currently a contributor to DS News and The MReport.
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