RBS fine fears weigh on share sale

Concerns RBS may be fined between $5bn (£4bn) and $12bn in the US are preventing the government from selling shares in the bank, MPs have heard.

RBS faces a settlement with the US Justice Department over claims it mis-sold toxic mortgage securities in the run-up to the financial crisis of 2008.

The size of that fine is weighing on the value of the bank, said James Leigh-Pemberton, the head of the body that manages the public's stake in RBS.

RBS was unavailable for comment.

Mr Leigh-Pemberton, the chairman of UK Financial Investments, told MPs that financial markets had speculated on the size of the settlement.

'No certainty'

"The fine might be $5bn, it might be $12bn," he said in a hearing of the Commons Treasury committee.

"Based on what was said to Deutsche Bank it could be more", he said, referring to a demand from the Justice Department that the German bank pay $14bn over the mis-selling charges.

UKFI itself does not have "any certainty of what the size of the fine is", he added.

Chancellor Philip Hammond has said uncertainty about RBS's US fine is one of the main reasons the government cannot sell more of its 72% holding in the bank.

It is also likely the Justice Department will wait until President-elect Donald Trump appoints a new Attorney General before it focuses on the case.

The range of possible outcomes meant investors could not work out how much RBS's shares should be worth, Mr Leigh-Pemberton said.

RBS also needs to resolve its disposal of Williams & Glyn branches before investors will be interested in buying shares, he added.

The government sold £2.1bn of RBS shares last year at 330p a share, below the 500p that the Labour government paid during the financial crisis.