REPORT: RBS investors will be pleased if it's only fined $10 billion for mortgage-backed security misselling

LONDON — Royal Bank of Scotland shareholders are preparing for the company to be hit with the biggest fine in its history from the US Department of Justice, according to the BBC’s business editor.

Simon Jack said investors he has spoken to have suggested that: “If the US Department of Justice (DoJ) slaps a fine around the $10bn mark, there will be drinks all round at RBS HQ and the share price will probably go up.”

Jack said that while RBS is reluctant to estimate the size of a possible fine, analysts are expecting something in the low-teens.

RBS did not immediately respond to Business Insider’s request for comment.

The fine relates to the misselling of mortgage-backed securities in the run-up to the 2007 foreclosure crisis in the US, which sparked the 2008 financial crisis and the Great Recession. Investment banks are accused of knowingly selling financial products made up of mortgages that they knew were of low quality.

RBS is one of the last major investment banks to settle with the DoJ (Barclays, another yet to have settled, is taking the fight to court.)

Deutsche Bank’s stock price was sent into freefall last year over concerns about its settlement with the DoJ. The regulator leaked a figure to the press suggesting it wanted $14 billion from the German investment bank, far exceeding the amount it had set aside for potential fines. Deutsche Bank eventually settled for $7.2 billion.

As the BBC points out, RBS’ presence in the mortgage-backed security market pre-2008 was much greater than Deutsche Bank’s, suggesting the taxpayer-owned bank’s fine will likely be much larger.

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