RBS may face huge new bill over loan scandal, UKFI says

 

Royal Bank of Scotland could face another huge bill as a result of a US mortgage trading scandal, bosses of the government agency charged with overseeing taxpayers' interests in banks warned yesterday.

They also said RBS needs to beef up its capital and work out where it is going before a sell-off of the majority state-owned bank can be contemplated.

Robin Budenberg, the chairman of UK Financial Investments, said mortgage trading was an "outstanding issue" faced by RBS.

Last week RBS agreed to pay more than $150m (£94m) to settle civil charges which alleged the bank had misled investors in a subprime mortgage product dating from the financial crisis era. JP Morgan last month agreed to pay $5bn to settle a number of cases related to sales of mortgage-backed securities.

Mr Budenberg said that it was "clear that the PRA [Prudential Regulation Authority] is rightly concerned, as is the board of RBS, about these potential liabilities".

James Leigh-Pemberton, the agency's new boss, also weighed in, describing the matter as being "of great concern".

RBS ominously set aside £385m to cover undisclosed legal and regulatory actions at its half-year results in addition to topping up the pool of cash designed to deal with mis-sold payment protection insurance.

Another issue that could engulf the bank is an investigation into allegations that City traders tried to fix Euribor interest rates in a similar manner to Libor rates, which has seen several banks including RBS paying huge fines.

The European Commission's competition watchdogs are currently in the throes of an investigation, and a result could come before the end of the year.

On the subject of privatisation, Mr Leigh-Pemberton, a former senior banker at Credit Suisse, told MPs: "There are certain issues in relation to RBS which absolutely have to be tackled as a precursor to successful reprivatisation."

These, he added, were "sufficient capital; strategic focus on businesses where they enjoy competitive advantage and higher returns; and the normalisation of the capital structure".

Ross McEwan, the new chief executive of RBS, is in the midst of a strategic review, but the results of his work will not be known until February.

However, Mr Leigh-Pemberton, who joined UK Financial Investments in October, thinks that the creation of an internal "bad bank" at RBS containing £38bn of toxic assets could speed up reprivatisation.

"The new plan will enable reprivatisation at least on the timetable that would have been achieved otherwise, and possibly with scope to act a little faster," he told MPs. But Mr Leigh-Pemberton said that markets would have to be "good" and the plan would have to be executed effectively and on time.

The Government recently started to sell off its interest in Lloyds Banking Group, and actually achieved a small profit. However, in June, regulators told RBS that it needed to plug a capital shortfall of £13.6bn, the biggest of any UK bank.

Mr McEwan hopes that a restructuring plan – as part of a process of reshaping the bank – will deal with concerns around its capital strength within the next 2 to 3 years.

RBS shares yesterday closed down 8.2p at 331.6p, still well below the 500p at which the taxpayer would be in profit.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Recruitment Genius: Online Customer Service Administrator

£16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

Recruitment Genius: Digital Marketing Executive

£18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

Day In a Page

'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before
'Queer saint' Peter Watson left his mark on British culture by bankrolling artworld giants

'Queer saint' who bankrolled artworld giants

British culture owes a huge debt to Peter Watson, says Michael Prodger
Pushkin Prizes: Unusual exchange programme aims to bring countries together through culture

Pushkin Prizes brings countries together

Ten Scottish schoolchildren and their Russian peers attended a creative writing workshop in the Highlands this week
14 best kids' hoodies

14 best kids' hoodies

Don't get caught out by that wind on the beach. Zip them up in a lightweight top to see them through summer to autumn
Robert Fisk in Abu Dhabi: The acceptable face of the Emirates

The acceptable face of the Emirates

Has Abu Dhabi found a way to blend petrodollars with principles, asks Robert Fisk