US regulators seek to recover billions lost in credit crisis as RBS staff rush to cash in deferred share bonuses from 2009
guardian.co.uk, Dominic Rushe and Nick Fletcher, Monday 20 June 2011
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| US regulators are suing JP Morgan and Royal Bank of Scotland. Above, RBS's London HQ. Photograph: Oli Scarff/Getty Images |
US regulators have sued Royal Bank of Scotland and JP Morgan for $800m (£495m), alleging that the banks made "numerous misrepresentations" selling mortgage-based securities.
The National Credit Union Administration (NCUA) is seeking to recover billions lost during the credit crisis and said it intends to file more suits. According to its suit, filed in Kansas, the banks gave investors documents that contained "untrue statements of material fact" or "omitted to state material facts" in violation of state and federal securities laws.
The suit refers to losses from five corporate credit unions that were taken over by regulators after their losses became unmanageable. The NCUA possesses hundreds of mortgage bonds held by failed corporate credit unions, which act as lenders and back office managers to credit unions.
"NCUA has a responsibility to do everything in our power to seek maximum recoveries from those involved in the issuing, underwriting and sale of the faulty securities that resulted in the failures of five of the largest wholesale credit unions," board chairman Debbie Matz said. "Those who caused the problems in the corporate credit union system should pay for the losses." JPMorgan and RBS declined to comment.
The move came as staff at state-owned RBS todaycashed in £138m worth of shares handed out as bonuses in 2009, the first available date they could be sold.
The bulk of the proceeds went to the group's investment bankers, although the bonus pool also included employees in branches and call centres. The shares were placed in the market at about 39p each, compared to the 37.87p prevailing when the bonuses were announced early in 2010. A total of £1.6bn was awarded in three tranches, with a third paid last year in bonds and the rest in deferred shares. About 354m shares were sold today, but another 300m were retained by staff. The bank made clear that Stephen Hester, the chief executive, parachuted in at the time of RBS's October 2008 bailout, was not taking part in the bonus share sale.
The disposals put more pressure on RBS's share price at a time of worries about the extent of banks' exposure to Greece and other struggling European countries. RBS's shares were the biggest faller in the FTSE 100 today , down 1.78p at 38.51p.
The bonuses were awarded after RBS cut its losses from £40.8m to £2.6m, but news that richly rewarded bankers were cashing in shares as soon as possible is likely to reignite protests that they are benefiting from the bailout.
The sector came under scrutiny recently after being ordered to repay mis-sold payment protection insurance, and the independent banking commission may recommend ringfencing banks' retail operations from the high-risk investment banking businesses. Although the commission's final report is not due until September, the chancellor has already thrown his weight behind the idea of separating retail from commercial banking.
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