RBS agrees £800m stakeholder settlement

The Royal Bank of Scotland (LON:RBS) (RBS) has agreed to a multi-million pound settlement with its stakeholders, over unresolved disputes relating to an ongoing 2008 rights issue.

The majority publicly-owned bank has agreed to put aside around £800 million across five stakeholder groups. The agreement covers around 77 percent of the claims in terms of value, and the company also pledged to reach a similar deal with the additional two remaining claimants.

Ross McEwan, Chief Executive of RBS commented:

“We have been very clear that we wanted to deal with as many of our legacy litigation issues as possible during 2015 and 2016. We are pleased to have reached this agreement and hope that it will be accepted by the remaining claimant groups so that this long course of complex and costly litigation can now be concluded.”

The issue arose after investors claimed they were misled when they became involved in the bank’s 2008 £12 billion rights issue. Despite raising the funds, the bank failed to post profits for the year and eventually had to be rescued by a £45.5 billion government bailout; meaning the shares issued in the rights claim have lost almost 90 percent of their market value.

The bank is also facing ongoing investigation regarding its involvement with missold mortgage bonds in the run up the financial crash. The bank has already been penalised with a fine of up to £8 billion from financial authorities in the U.S.

Just last week the bank failed annual stress tests set by the Bank of England, and acknowledged the need for further capital if they were to survive any unexpected crisis. The test was deemed one of the most comprehensive yet, toughest stress test yet, and covered the impact of “a very severe, synchronised UK and global economic recession, a congruent financial market shock and separate misconduct cost stress”.

As of currently, RBS remains 73 percent owned by the tax-payer. The Chancellor Phillip Hammond has said that the government aims to significantly reduce this share through the selling of over 300 branches in the next coming years.

Amid the news of the agreement, shares of RBS have been on the rise up by 1.55 percent as of 10:32AM.