RBS pays £26m over ‘reckless’ US home loans
ROYAL BANK of Scotland has agreed to pay $42.5 million (£26.5m) in an out-of-court settlement with the Nevada attorney general.
The move follows an inquiry into the bank’s “reckless” sub-prime lending in the state between 2004 and 2007.
Catherine Masto, the Nevada attorney general, said in a statement: “The payment from RBS will alleviate some of the injury to the Silver State [Nevada] and its residents. The changes to its securitisation process should help make sure that we do not go down this road again.”
An RBS spokesman confirmed the settlement yesterday, saying: “We are pleased to resolve the matter.”
The stateside probe is understood to have found that the bank formed joint ventures with US mortgage lenders Countrywide Financial Corp and Option One during the housing boom, to make loans that were not likely to be repaid.
It was reported that RBS had funded more than $100 billion of risky loans from 2004 to 2007, and was the third biggest securitiser of sub-prime mortgages and adjustable rate loans in Nevada.
RBS is also under investigation in both the UK and America for potential manipulation of the Libor rate at which banks lend to each other.
One analyst said: “It is nice to get things such as this out of the way, but in financial terms it is pretty insignificant compared to the sums RBS will have to pay for payment protection insurance [PPI] mis-selling, for instance.”
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