RBS faces £5bn fine over US dealings

RBS could be hit with far higher levies than it has budgeted for

Shares fell in Royal Bank of Scotland yesterday on reports that it could face a further £5bn of fines in the US.

Reports suggested RBS could be hit with far higher levies than it has budgeted for so far as a raft of US regulators prepare cases against it over alleged misrepresentation of the true creditworthiness of mortgages behind bundles of loans that it sold in the housing bubble of 2005 to 2007.

Shares in the bank fell 5.3p to 389.1p on the reports.

RBS has set aside £1.9bn to deal with the claims, but the Federal Housing Finance Agency could demand more than £5bn over the way it sold $32bn (£21bn) of mortgages through its Greenwich Capital Markets subsidiary in the US.

Given the 81 per cent ownership by the Treasury, any fines it pays to foreign regulators are in essence wealth transfers from British taxpayers to foreign ones. In June, RBS paid the US Securities and Exchange Commission a fine of $99.5m over $2bn of mortgage-backed bonds, but the new case is examining far more loans.

Analysts at Credit Suisse last year estimated that European banks would take an $11bn hit on a raft of mortgage-related litigation costs in the US.

The RBS chief executive Ross McEwan said in October that it would not pay a dividend until it had strengthened its position and had clarity over future misconduct charges.