(Adds further details on settlement, comments from Connecticut
attorney general and RBS)
By Nate Raymond
Oct 3 Royal Bank of Scotland Group Plc
will pay $120 million to resolve a Connecticut state
investigation into the bank's underwriting of toxic
mortgage-backed securities ahead of the 2008 financial crisis,
authorities said on Monday.
The deal, announced by Connecticut Attorney General George
Jepsen and state Department of Banking Commissioner Jorge Perez,
came as the bank has been seeking to resolve a series of probes
and lawsuits over mortgage bonds.
Before the financial crisis, authorities said, the bank's
RBS Securities Inc unit was the lead underwriter on $250 billion
worth of residential mortgage-backed securities, an investment
product backed by payments by thousands of homeowners.
When home prices collapsed and the economy faltered,
subprime mortgage borrowers whose loans were linked to the
securities were unable to make payments, Connecticut authorities
The state claimed RBS conducted inadequate due diligence on
the loans pooled into its deals and engaged in dishonest or
unethical conduct that resulted in untrue statements to
investors about loans contained in the securities products.
"RBS failed to properly determine - and misstated - the
quality of the mortgage loans comprising many mortgage-backed
securities," Jepsen said in a statement.
As part of the settlement, RBS also resolved claims with the
state's Department of Banking stemming from its 2015 agreement
to plead guilty to trying to manipulate foreign exchange rates,
as part of a deal with the U.S. Justice Department.
RBS in August disclosed that it had reached a settlement
with Connecticut, without revealing the financial terms. The
bank said it was pleased to resolve the matter.
"Putting these issues behind us remains a priority; there is
more work to be done, but we are making progress," RBS said in a
The deal was announced almost a week after the National
Credit Union Administration said it reached a $1.1 billion
settlement with RBS to resolve lawsuits it filed over toxic
mortgage-backed securities the bank sold to credit unions that
RBS continued to face an investigation by the U.S. Justice
Department over mortgage-backed securities.
In January, RBS said it had set aside 3.8 billion pounds
($4.9 billion) to resolve civil lawsuits over mortgage-backed
Among the lawsuits it faces is a multibillion-dollar case
brought by the Federal Housing Finance Agency, which has acted
as the conservator for mortgage giants Fannie Mae and Freddie
Mac since their government takeover in 2008.
(Reporting by Nate Raymond in New York; Editing by Chizu