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RBS bank agrees $4.9bn civil penalty to end US probe RBS bank agrees $4.9bn civil penalty to end US probe
(35 minutes later)
Royal Bank of Scotland has agreed a $4.9bn (£3.6bn) penalty with US regulators to end a long-running probe into its actions in the lead-up to the financial crisis.Royal Bank of Scotland has agreed a $4.9bn (£3.6bn) penalty with US regulators to end a long-running probe into its actions in the lead-up to the financial crisis.
RBS boss Ross McEwan said the agreement in principle with the US Justice Department (DoJ) was "a milestone".RBS boss Ross McEwan said the agreement in principle with the US Justice Department (DoJ) was "a milestone".
The probe into RBS's sale of financial products from 2005 to 2007 has been a financial cloud hanging over the bank. The probe focused on the sale of financial products including toxic mortgage bonds from 2005 to 2007.
The deal removes a stumbling block to government plans to sell its 71% stake. The government is now expected to start selling its 71% stake in the bank.
Chancellor Philip Hammond said last year that he was reluctant to sell shares while the DoJ probe had still to be resolved.Chancellor Philip Hammond said last year that he was reluctant to sell shares while the DoJ probe had still to be resolved.
The DoJ said further details must be negotiated before a final deal is done. Analysis: Simon Jack, BBC business editor
Mr McEwan said: "Today's announcement is a milestone moment for the bank.
"Removing the uncertainty over the scale of this settlement means that the investment case for this bank is much clearer."
Analysis: Simon Jack, business editor
The settling of the outstanding penalty for RBS' role in the financial crisis was the last obstacle standing in the way of selling the government's enormous 71% stake back to the private sector in what will be the biggest privatisation in UK history.The settling of the outstanding penalty for RBS' role in the financial crisis was the last obstacle standing in the way of selling the government's enormous 71% stake back to the private sector in what will be the biggest privatisation in UK history.
The government owns over £20bn worth of shares. That is a colossal amount to sell and will take several years.The government owns over £20bn worth of shares. That is a colossal amount to sell and will take several years.
The first sales will be at a loss, but the government will hope that over time, as the huge overhang of shares to sell dwindles and profits continue to rise, the public may get more money back.The first sales will be at a loss, but the government will hope that over time, as the huge overhang of shares to sell dwindles and profits continue to rise, the public may get more money back.
The public though are unlikely to ever recoup the £45bn poured into the biggest banking debacle in UK corporate history.The public though are unlikely to ever recoup the £45bn poured into the biggest banking debacle in UK corporate history.
Mr McEwan said: "Reaching this settlement in principle with the US Department of Justice will, when finalised, allows us to deal with this significant remaining legacy issue and is the price we have to pay for the global ambitions pursued by this bank before the crisis." Read more from Simon
RBS said about $3.6bn of the penalty would be covered by money already set aside. Many analysts had forecast that the settlement could be larger than $4.9bn.RBS said about $3.6bn of the penalty would be covered by money already set aside. Many analysts had forecast that the settlement could be larger than $4.9bn.
The DoJ said further details must be negotiated before a final deal is done. But Mr McEwan called the deal a "milestone moment" for the bank.
"Removing the uncertainty over the scale of this settlement means that the investment case for this bank is much clearer," he said.
Jane Sydenham, from Rathbone Investment Management, told the BBC: "Removing this final cloud will make a difference, it will mean the government can press ahead with a sale and it can start to look forward, rather than spending all their time worrying about what happened in the past."