The Royal Bank of Scotland Group plc
) announced a settlement with the Securities and Exchange
Commission (SEC) worth about $153.7 million. The settlement
includes the resolution of claims relating to misrepresentations
of documents while selling mortgage-backed securities (MBS) in
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The lodged complaint indicts RBS of presenting modified documents
related to the sale of over $2.2 billion in residential
mortgage-backed securities (RMBS).
The SEC accused RBS of issuing misleading statements with
omissions related to MBS and concealment of risks associated with
these securities. The plaintiff claims that the documents used
for offering the securities contained fraudulent statements or
omissions regarding the guidelines associated with the
properties' value and the borrowers' ability to repay their
loans. Misinterpretation of these risks led to the investments,
which incurred losses at current levels.
Similar actions have been taken against other banking majors,
JPMorgan Chase & Co.
The Goldman Sachs Group Inc.
). Notably, Goldman agreed to pay $550 million in Jul 2010, while
JPMorgan settled charges by paying $153.6 million in Jun 2011 and
a further $296.9 million in Nov 2012 to the SEC. Further,
Citigroup has agreed to pay $285 million.
Trouble has been brewing for the banks for quite sometime now. A
slew of lawsuits have continued for major banks since the
financial meltdown. Numerous lawsuits alleging banks of such
wrongdoings are expected to tarnish their reputation and
financials over time. However, investors and other financial
institutions bearing the brunt of these faulty practices are
expected to be fairly compensated.
The lawsuit settlement by banks stress on their efforts to
resolve all mortgage related issues, and thereby reduce costs
over the upcoming period. Moreover, such agreements will likely
help revive the economy, and bode well for the company.
RBS currently carries a Zacks Rank #3 (Hold).