RBS To Pay $4.9 Bln For Financial Crisis-Era Misconduct

(RTTNews) - Royal Bank of Scotland Group Plc. (RBS, RBS.L) will pay $4.9 billion to settle charges that it misled investors ahead of the 2008 financial crisis. The settlement is largest penalty imposed on a single entity by the U.S. Justice Department for financial crisis-era misconduct.

"This resolution - the largest of its kind - holds RBS accountable for defrauding the people and institutions that form the backbone of our investing community," said Andrew Lelling, U.S. Attorney for the District of Massachusetts.

The Justice Department said that the settlement resolves federal civil claims that RBS misled investors in the underwriting and issuing of residential mortgage-backed securities or RMBS between 2005 and 2008. The settlement included a statement of facts that details - using contemporaneous calls and emails of RBS executives - how RBS routinely made misrepresentations to investors about significant risks it failed to disclose about its residential mortgage-backed securities.

The Department noted that RBS earned hundreds of millions of dollars, while simultaneously ensuring that it received repayment of billions of dollars it had lent to originators to fund the faulty loans underlying the RMBS. RBS used RMBS to push the risk of the loans, and tens of billions of dollars in subsequent losses, onto unsuspecting investors across the world, including non-profits, retirement funds, and federally-insured financial institutions. As losses mounted, and after many mortgage lenders who originated those loans had gone out of business, RBS executives showed little regard for this misconduct and made light of it.