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RBS subsidiary to settle US probe

A Royal Bank of Scotland subsidiary has agreed to pay 153.7 million US dollars (£95.5 million) to settle a US probe into allegations it misled investors over a "shoddy" subprime mortgage product around the time of the financial crisis.

RBS Securities was said to have "cut corners" in its assessment of the loans tied up in the 2.2 billion US dollar (£1.4 billion) financial product.

The unit allegedly said these loans generally met its underwriting guidelines, which consider the loan-to-value ratio and the borrower's ability to repay

But America's Securities and Exchange Commission (SEC) said it should have known that was false since 30% of the mortgages underlying the offering fell so short of these standards that they should have been excluded.

In a complaint filed in a Connecticut court, the regulator said the unit, which was then known as Greenwich Capital Markets, was paid approximately 4.4 million US dollars (£2.7 million) for its work as lead underwriter on the transaction.

It said the investors were given a misleading impression of the quality of the loans backing the offering and the likelihood of their repayment.

George Canellos, co-director of the SEC's enforcement division, said: "In its rush to meet a deadline set by the seller of these loans, RBS cut corners and failed to complete adequate due diligence, with predictable results.

"Today's action punishes that misconduct and secures more than 150 million US dollars in relief for those harmed by this shoddy securitisation."

In London, RBS said the fine was covered by provisions it had already set aside, and that it had co-operated with the probe.

The bank said its subsidiary neither admitted nor denied SEC allegations "that a prospectus statement that loans included in the offer were originated generally in accordance with lender guidelines was materially misleading".

It is the latest misconduct claim to arise from the troubled past of the lender, which is 80% taxpayer-owned following its collapse during the financial crisis.

Last week, RBS admitted it, like a number of other banks, had been drawn into a separate regulatory probe over foreign exchange trading. Some of its traders are reported to have been suspended.


From Belfast Telegraph