The chairman of UK Financial Investments, the body responsible for the government's stake in Royal Bank of Scotland (RBS) and Lloyds Banking Group, has warned that RBS could face further fines from regulators over sales linked to the US sub-prime mortgage crisis.
Robin Budenberg, who joined UKFI in 2010 from UBS, told the Treasury Select Committtee (TSC) on Tuesday that while it was difficult to estimate future liabilities, potential fines had formed a "fundamental part of discussions" between the RBS board and the Bank of England's Prudential Regulation Authority (PRA), the Telegraph reports.
Making reference to J.P. Morgan, which last month agreed to pay $5bn to settle a string of legal cases relating to sales of mortgage-backed securities, Mr Budenberg said mortgage trading was one of the outstanding issues RBS faced.
"It is clear that the PRA is rightly concerned, as is the board of RBS about these potential liabilities," said Mr Budenberg.
James Leigh-Pemberton, the new chief executive of UKFI, added that the matter was "of great concern".
Last week, RBS agreed a $150m (£93m) settlement with US regulators over allegations it "cut corners" in a 2007 sale of $2.2bn of mortgage-backed bonds.
The bank is also being sued by US mortgage giant Fannie Mae over alleged Libor manipulation, while two RBS traders have been suspended amid an investigation into foreign exchange rigging.
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