UK chancellor rules out dropping government’s stakes in RBS after US hit of £3.1bn

World - Mohit Shah - Jan 28,2017

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uk chancellor rules out dropping governments stakes in rbs after us hit of 31bn pound

Royal Bank of Scotland has taken a provision of 3.1 billion pound as it plans to settle claims related to mis-sold toxic mortgage-backed securities in the U.S during the 2008 financial crisis. 

The chancellor has ruled out dropping government’s stake in Royal Bank of Scotland after it procured a £3.1bn hit towards the cost of a mortgage mis-selling scandal in the U.S.

The charge for the latest monitoring failure will push RBS to its ninth consecutive annual loss. Currently, the RBS is making negotiations with the U.S. Department of Justice in context to the settlement, the judgment of which is still uncertain. 

Chief Executive Ross McEwan said that the bank had “lost its way” into the buildup to the 2008 crisis. He has been trying to clean up RBS's balance sheet and close an array of legal cases so that the government can trade its more than 70 percent stake in the investor after a 45.5 billion pound bailout which occurred during the financial crisis.

It is noted that, the bank’s shares are trading close to 230p level, significantly below the 502p average price that taxpayers funded during the crisis.

Royal Bank of Scotland has set aside £6.7bn to cope up with 15 investigations connected to the way it packaged up mortgages and sold them to investors before the financial crisis.

The British government has said that the uncertainty regarding the scale of the penalty is one of the prime reasons why it ceased plans to sell any additional shares in the lender.

McEwan said in a statement, "Putting our legacy litigation issues behind us, including those relating to RMBS, remains a key part of our strategy." He further added that, the bank prioritizes to seek the best outcome for the customers, shareholders and employees.