why is it up ?22 Nov 2016 15:41
UPDATE 1-U.S. settlement is blocking RBS share sale - UKFI chairman
Wed, 16th Nov 2016 16:41
* UKFI Chairman says market sees $5-12 bln RMBS fine for RBS
* Williams & Glyn issue must be fixed before share sale resumes
* RMBS settlement seen having impact on capital, shares (Adds share price, timing of share sale, comments on Williams & Glyn)
By Lawrence White and Andrew MacAskill
LONDON, Nov 16 (Reuters) - The head of the agency managing Britain's stakes in bailed out banks said market speculation that Royal Bank of Scotland faces a potential fine of between $5 to $12 billion from the U.S. is hindering the government's share sale plans.
RBS, in common with other European lenders, faces a settlement with the U.S. Department of Justice (DoJ) over its role in selling mortgage-backed securities in the run-up to the 2008 financial crisis.
"It could be $5 billion, it could be $12 billion, and based on what happened to Deutsche Bank it could be more," James Leigh-Pemberton, Chairman of UK Financial Investments (UKFI), which manages the government's stake in RBS, told the Treasury Select Committee.
RBS, 73 percent state-owned, has not made a profit since it was rescued with a 46 billion pound ($57 billion) government bailout during the financial crisis.
Leigh-Pemberton told the Committee, which was quizzing UKFI on its management of the government's sale of its RBS stake, that reports on the size of RBS's potential settlement with the DoJ were "market speculation" and the final range is unknown.
Deutsche Bank has said it will fight a $14 billion initial demand from the DoJ to settle claims it missold mortgage-backed securities, a shock bill that raised questions about the future of Germany's largest lender.
Investors will be unlikely to want to buy RBS shares until the bank has resolved its DoJ settlement because of the likely impact on the bank's capital position.
"The direct impact of the settlement number on the bank's book value and capital is an almost penny-for-penny impact on the share price," Leigh-Pemberton said.
Leigh-Pemberton said that UKFI has raised the settlement with the government and that Britain's Treasury is "acutely conscious of the impact of this litigation" on RBS and the value of its shares.
Aside from settling the U.S. case, RBS also needs to resolve its disposal of branches under the Williams & Glyn name before investors will be interested in buying the bank's shares, Leigh-Pemberton said.
RBS has blamed the complexities of creating a standalone technology platform for delays in the sale of Williams & Glyn, which was a key European Union condition of its taxpayer-funded rescue at the peak of the global financial crisis.
RBS shares have fallen 31 percent in the year to date, against an 8 percent rise in the benchmark FTSE 100 index . ($1 = 0.8037 pounds) (Reporting By Lawrence White and Andrew MacAskill, editing by Huw Jon