RBS 2014 Annual Report Download - page 104

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RBS – Interim Results 2015
Notes
16. Litigation, investigations and reviews (continued)
Other securitisation and securities related litigation in the United States
RBS companies have been named as defendants in their various roles as issuer, depositor and/or
underwriter in a number of claims in the United States that relate to the securitisation and securities
underwriting businesses. These cases include actions by individual purchasers of securities and purported
class action suits. Together, the pending individual and class action cases (including those claims
specifically described in this note) involve the issuance of approximately US$45 billion of mortgage-backed
securities (MBS) issued primarily from 2005 to 2007. In general, plaintiffs in these actions claim that certain
disclosures made in connection with the relevant offerings contained materially false or misleading
statements and/or omissions regarding the underwriting standards pursuant to which the mortgage loans
underlying the securities were issued.
RBS companies remain as defendants in more than 25 lawsuits brought by or on behalf of purchasers of
MBS, including the purported class action identified below.
In the event of an adverse judgment in any of these cases, the amount of RBS’s liability will depend on
numerous factors that are relevant to the calculation of damages, which may include the recognised loss of
principal value in the securities at the time of judgment (write-downs); the value of the remaining unpaid
principal balance of the securities at the time the case began, at the time of judgment (if the plaintiff still owns
the securities at the time of judgment), or at the time when the plaintiff disposed of the securities (if plaintiff
sold the securities); and a calculation of pre and post judgment interest that the plaintiff could be awarded,
which could be a material amount.
In September 2011, the US Federal Housing Finance Agency (FHFA) as conservator for the Federal
National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie
Mac) filed MBS-related lawsuits against RBS and a number of other financial institutions, all of which, except
for the two cases described below, have since settled for amounts that were publicly disclosed. The primary
FHFA lawsuit against RBS remains pending in the United States District Court for the District of Connecticut,
and it relates to approximately US$32 billion of MBS for which RBS entities acted as sponsor/depositor
and/or lead underwriter or co-lead underwriter. Of these US$32 billion, approximately US$9.1 billion were
outstanding at 30 June 2015 with cumulative write downs to date on the securities of approximately US$1.09
billion (being the recognised loss of principal value suffered by security holders). In September 2013, the
Court denied the defendants’ motion to dismiss FHFA’s amended complaint in this case. The preliminary
phases of this matter, including discovery, are expected to continue into 2016.