£14bn US Deutsche fine rocks RBS

Shares in Edinburgh-based RBS fell by almost six per cent on news that its fellow banking giant had been hammered by the US Department of Justice (DoJ) which has been investigating both RBS and Deutsche for their role in selling mortgage-backed securities in the early 2000s.

The securities are widely seen as a major contributor to the 2007 global financial crash.

While RBS has yet to begin negotiations with the DoJ, the size of the fine imposed on Deutsche has clearly provided an insight for investors of what is likely to be in store for RBS.

RBS shares fell 4.43 per cent or 8.6p to 185.6p as investors grew worried the bank – in which the Government has a majority stake – would have to pay up to £10bn to settle the claims.

Mike van Dulken, head of research at online trading services provider Accendo Markets, noted that RBS suffered so much on the Deutsche news “because it remains in the firing line stateside for its own mis-selling and actions in the run-up to the financial crisis”.

He added that while analysts had been expecting RBS’s DoJ fine to be somewhere in the region of £4-9bn, the unexpectedly large size of the penalty imposed on Deutsche could lead to a reassessment.

Despite the size of its fine, Deutsche said it “has no intention” of paying a settlement of that size.

Citigroup successfully negotiated the reduction of a similar fine from $12bn to $7bn.

However, Neil Wilson of ETX Capital said the size of the Deutsche Bank fine would still have “serious implications” for RBS.

“Even a third of this figure would deliver a crippling blow to the lender, making its return to profitability even further off,’ he said.

“It would also derail plans to return the bank to private ownership any time soon”, he added.

RBS has declined to comment.