RBS to Pay $120 Million to Settle Connecticut Probe

Royal Bank of Scotland Group PLC will pay $120 million to settle a four-year investigation by Connecticut into the U.K. lender's underwriting of residential mortgage-backed securities before the 2008 financial crisis.

RBS and Connecticut's banking department had reached a preliminary agreement in June regarding the investigation, an RBS spokesman said.

He added that the final settlement with Connecticut is covered under provisions that the bank previously has set aside to cover such matters. In January, RBS disclosed an additional 2.5 billion British pounds ($3.21 billion) to cover a slew of regulatory issues.

"We are pleased to have resolved this matter," the RBS spokesman said in prepared remarks Monday. "Putting these issues behind us remains a priority; there is more work to be done, but we are making progress."

According to the Connecticut attorney general's office, from early 2005 through 2008, RBS was the main underwriter for 250 RMBS deals valued at a combined $250 billion and as such was required to conduct due diligence on pools of mortgages that served as the underlying collateral.

Connecticut Attorney General George Jepsen said in prepared remarks that to date the $250 billion of RMBS deals have resulted in more than $40 billion in losses.

"With today's settlement, we are holding RBS accountable under Connecticut law for its behavior that contributed significantly to the 2008 financial crisis," Mr. Jepsen stated.

The state government had alleged that RBS's due diligence process was inadequate and resulted in inaccurate information being disclosed to investors regarding the securities products.

The accord comes after RBS last week agreed to pay $1.1 billion to a U.S. regulator to resolve two civil lawsuits related to the way it sold mortgage-backed securities in the run-up to the financial crisis. Last week RBS said the settlement with the National Credit Union Administration Board was substantially covered by existing provisions.

Write to Tess Stynes at [e-mail]

(END) Dow Jones Newswires

October 03, 2016 13:15 ET (17:15 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.