Royal Bank of Scotland may pursue Goldman Sachs for substantially more than the $100 million it received as part of a settlement over the marketing of a subprime mortgage product. RBS said on Friday it would "carefully consider all of its options" after Goldman agreed on Thursday to pay it $100 million as part of a $550 million settlement of civil fraud charges over how it sold the controversial investment.
German bank IKB, the other big loser on the transaction, will be paid $150 million, recovering all of its loss. RBS lost $841 million on the transaction at the heart of the SEC's case, known as Abacus 2007-ACI. Its options include taking Goldman to court after the US Securities and Exchange Commission said the penalty left the door open for future civil suits.
RBS declined to comment on whether it would sue Goldman, but some investors have urged it to pursue that route. Goldman did not admit any wrongdoing but said the marketing materials for Abacus 2007-ACI contained incomplete information. It said it was "a mistake" not to disclose the role of hedge fund Paulson & Co in picking the portfolio or that Paulson bet against its performance.
RBS is 83 percent state owned. Former UK Prime Minister Gordon Brown said in April that Goldman would have to pay back "hundreds of millions of dollars" if the charges against it were proven. By 1412 GMT RBS shares were down 3.4 percent at 43.67 pence, compared with a 3 percent fall in the European bank index as US banks Citigroup and Bank of America reported weaker-than-expected revenue.
RBS and IKB were two of the biggest losers of both the controversial product marketed by Goldman and of the wider financial crisis. Each needed billions of euros in state bailouts to survive. Edinburgh-based RBS paid Goldman $841 million in August 2008 to settle a claim on credit insurance provided by ABN Amro, the Dutch bank of which RBS had bought parts months earlier. IKB was brought to the brink of collapse in 2007 in part because of exposure to subprime-related products Goldman sold to IKB's off-balance-sheet investment vehicle Rhineland Funding.
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