Bankers and traders at Royal Bank of Scotland joked about destroying the US economy and admitted they were selling “garbage” to investors in the run-up to the 2008 financial crisis.
Damning documents released by US authorities show senior RBS staff routinely misrepresented the significant risks faced by investors in residential mortgage-backed loans, a key factor in the financial crash.
They also highlight a shocking lack of concern over the financial mayhem that was unfolding.
The US Department of Justice report into the mis-selling of mortgage-backed securities was revealed on the same day RBS was officially ranked as Britain’s worst bank by consumers and businesses.
The taxpayer-owned bank came bottom of both business and personal banking in league tables based on a survey of customers.
In yet another dark day for the Edinburgh-based bank, the US report was published alongside an announcement that RBS has agreed a settlement figure of $4.9bn (£3.6bn) in response to its findings. However, RBS has disputed and not admitted the allegations put forward by American authorities.
RBS has been dogged by several scandals since its Government bailout in 2008, including for the mistreatment of small businesses by its Global Restructuring Group, and most recently a bank branch closure drive.
The DoJ investigation probed the mis-selling of residential mortgage-backed securities (RMBS) between 2005 and 2008. RMBS were home loans bundled together as tradeable assets that helped spark the financial crash.
The documents detail how RBS "routinely made misrepresentations to investors about significant risks it failed to disclose about its RMBS", and show bankers making light of their behaviour.
In one startling email exchange involving RBS’s head trader, he refuted a suggestion that he was destroying the US housing market by replying: “I am more comfortable with ‘severely damage’.”
In another incident, RBS's chief credit officer in the US is quoted as saying that the assets were made up of "total f****** garbage", loans with "fraud (that) was so rampant ... (and) all random”. He went on to suggest loans were “all disguised to, you know, look okay kind of ... in a data file".
Throughout the deals, the DoJ said RBS executives joked and showed little regard for their misconduct.
The DoJ estimates RBS underwrote and issued mortgage-backed securities that have so far resulted in losses worth more than $49 billion (£38 billion), and forecasts another $5.6 billion (£4.4 billion) will be lost.
It is not the first time RBS staff have been at the centre of suggestions they acted inappropriately towards customers and investors. The UK Financial Conduct Authority’s investigation into the bank’s Global Restructuring Group revealed “systematic and widespread” mistreatment of small businesess left flailing in the wake of the financial crisis, with bankers apparently gloating as businesses battled to survive.
- READ MORE: RBS pays dividend to shareholders while being hit for £3.8bn for financial crisis misconduct
The group was said to have intentionally pushed small businesses towards failure, hoping to mop up their assets on the cheap.
The UK bank was the world's third largest underwriter of RMBS behind Lehman Brothers and Bear Stearns.
Andrew Lelling, the US attorney for the district of Massachusetts, said: "This resolution - the largest of its kind - holds RBS accountable for defrauding the people and institutions that form the backbone of our investing community.
"Despite assurances by RBS to its investors, RBS's deals were backed by mortgage loans with a high risk of default.”
RBS chief executive Ross McEwan said: "We are pleased to have reached a final settlement with the DoJ and that we can focus our energy on serving our customers better and returning capital to our shareholders.
"There is no place for the sort of unacceptable behaviour alleged by the DoJ at the bank we are building today."
Meanwhile, RBS yesterday launched fresh anti-fraud advice, after dealing with almost 500,000 scam attempts which could have cost £245 million.
Most of the scams were said to have involved romance, holiday and ticketing frauds.
The bank launched a campaign to help fight online fraud following a meeting with Finance Secretary Derek Mackay, business representatives, security specialists and Police Scotland.
Chief executive Mr McEwan met with Finance Secretary Derek Mackay, Mandy Haeburn-Little from the Scottish Business Resilience Centre and Chief Superintendent John McKenzie to discuss steps that could be taken to stop fraudsters.
The meeting coincided with the launch of the bank's Little Book of Big Scams, with advice for customers online and in print.
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