An influential British MP has claimed the Foreign Office should lobby the US government to get them to scrap a £5 billion ($8 billion) fine facing Royal Bank Of Scotland (RBS).
Jacob Rees-Mogg, a high profile member of the Treasury Select Committee, says Britain’s diplomats should be trying to get the US financial regulators to stop the litigation against the bank.
He asked UK Financial Investments (UKFI), the government agency managing the taxpayers’ 72.9% stake in RBS, if they have asked for diplomatic help to get the issue resolved.
UKFI boss James Leigh-Pemberton, who was appearing before the committee, was asked: “Are you saying to the Treasury they should use the government’s diplomatic efforts with our closest ally to avoid the British taxpayer being fined $8 billion by the American taxpayer?
‘A bit stiff’
“If I were you I would be saying, what is the British Embassy for if it is not trying to get RBS off this fine? Our closest ally fining us $8 billion is a bit stiff.”
The UKFI boss said it was not for him to ‘go outside of our remit of commercial management and engage in areas of activity where we really do not have any expertise.’
But Mr Leigh-Pemberton did admit he was keen to get the matter settled before it comes to court which is expected to be in early 2017.
“From our point of view, certainty and resolution of this issue at the earliest possible opportunity is highly desirable,” he told the committee.
“But certainty and resolution at any price is not,” he added. “It is about finding the right balance between getting it out of the way on the one hand and ensuring taxpayer value is not adversely affected on the other. That is the task of the management team.”
An early settlement would boost the bank’s share price in time for the Chancellor’s planned re-privatisation later this year. Getting the issue out of the way would remove some uncertainty for potential investors, making the sell-off a more attractive proposition.
The first 600 million shares were sold recently to institutional investors at a loss of £1 billion. They were sold for 330 pence per share, 170 pence less than the £5 per share that the Labour government paid for them when they bailed the bank out in 2008.
Unlike Britain’s other taxpayer-owned bank, Lloyds, RBS has never made a profit in the seven years since the bail-out.
The US legal action is just the latest in a series in a series of scandals and mis-selling scenarios the RBS has been involved in.
They have previously been fined £390 million for their part in the LIBOR rate rigging scandal and is one of six banks world-wide hit with a record £6.3 billion fine in May this year for manipulation of the world’s foreign exchange markets. Mis-selling of PPI to UK consumers has also cost the bank millions of pounds.
The US court case at the centre of latest fine revolves around the sale of toxic mortgages to US citizens.
They have been accused of making false statements when selling home loan bonds to the US government backed Fannie Mae and Freddie Mack mortgage suppliers. US district judge, Denise Cote, commented: “The magnitude of falsity, conservatively measured, is enormous.”