RBS worried US fines for mortgage-backed securities may top £7bn

2nd Jan 2015 13:55

The £2bn provision set aside by Royal Bank of Scotland to pay fines in the US for marketing of toxic mortgage-backed securities could be more than three times too small, according to sources at the bank.A full settlement with US financial authorities could cost RBS upwards of £7bn, according to senior sources at the bank cited by The Times.The taxpayer-owned bank faces fines in the US for the $32bn of mortgage-backed securities marketed by subsidiary RBS Greenwich Capital that authorities claim the bank knew were being mis-sold.With other US rivals already having settled for tens of millions of dollars, RBS has set aside a £1.9bn provision but insiders now believe settling with the Federal Housing Finance Agency alone could absorb this amount with the Department of Justice (DoJ) also pursuing a hefty sum.In August, the DoJ agreed a $9.7bn settlement with the Bank of America, which paid out nearly $17bn in total.RBS already paid a $150m fine in 2013 to the Securities and Exchange Commission, after the US market regulator found evidence that Greenwich Capital misled investors in a $2.2bn security backed by a portfolio of mortgages that the company assured investors were in line with underwriting guidelines.