The stereotype is that Scots do not like to part ways with their pounds. That they are, in a word, thrifty. So coughing up $5.5 billion to settle allegations that it was a wee bit less-than-forthcoming with the truth about the mortgage-backed securities it was selling Fannie Mae and Freddie Mac will no doubt be painful for the Royal Bank of Scotland, especially since it’s a tad more than people expected it to pay, and it eats up the lion’s share of its ever-growing legal reserve. That’s enough to make anyone a bit dour, and most Scots are already working with a rather high level of ambient pessimism. But, you know, it could have been worse.
You see, the Federal Housing Finance Agency sued 18 banks on behalf of the aggrieved Fannie and Freddie, that against RBS was the biggest, and has now become the last to resolve itself. But did RBS pay the biggest fine? No, lads, it did not! Brian Moynihan and the jokers over at Bank of America—notably profligate, you Yanks—did. So that’s something to raise a dram to.
Now, back to the dour: That $5.5 billion is only the beginning.
The bank still faces probes from several U.S. agencies including criminal and civil investigations by the U.S. Department of Justice. RBS warned Wednesday that “further substantial provisions and costs may be recognized…depending upon the final outcomes.” Analysts at Jefferies estimate RBS will set aside a further $2.5 billion by the end of the year to cover future Justice Department settlements. So far, the bank hasn’t had meaningful discussions with the Justice Department over any settlement, said RBS Chief Financial Officer Ewen Stevenson.