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RBS Securities Inc., a division of Royal Bank of Scotland, agreed to a $120 million settlement with the state government of Connecticut regarding charges of problematic underwriting of residential mortgage-back securities (RMBS) in the years prior to the 2008 financial crisis.
Under the terms of the settlement, which is the largest of its kind in Connecticut’s history, the Department of Banking will receive $250,000 for financial education and training and a financial literacy program. The remainder of the settlement funds, totaling $119,750,000, will be deposited in the state's General Fund.
"RBS was one of the key players in the RMBS business in the lead up to the financial crisis, underwriting $250 billion in securities that have to date suffered more than $40 billion in losses," Attorney General George Jepsen said. "With today's settlement, we are holding RBS accountable under Connecticut law for its behavior that contributed significantly to the 2008 financial crisis."
"The ripple effect of the practices of financial institutions coupled with the devaluing of residential mortgage backed securities was felt by residents across Connecticut who were foreclosed out of their homes and lost their jobs as a result of the ensuing financial crisis," said Banking Commissioner Jorge Pérez. "We were pleased to have collaborated with the Attorney General's office on this investigation. Examiners and attorneys from our Securities and Business Investment Division used their extensive knowledge of the industry to help identify how the values of these securities were misstated. Together our work helped bring to light where these investors were failed."