The Royal Bank of Scotland has agreed to settle allegations that it misled pension funds about the risk involved in the investment of residential mortgage-backed securities.
At issue are RMBS that were sold to
CalPERS, California’s public employee pension fund, and CalSTRS, the state’s pension fund for teachers.
RBS is accused of misrepresenting the RMBS by failing to accurately
disclose the true characteristics of many of the underlying mortgages.
That is according to an announcement Friday from California Attorney General Xavier Becerra.
In addition, RBS allegedly failed to adequately perform due diligence to remove poor quality loans from the securitizations.
“RBS was aware of the misrepresentations but failed to correct them,” the state claims. “This resulted in millions in losses to CalPERS and CalSTRS.”
The statement said that RBS has agreed to settle the allegations for $125 million.
Including the RBS settlement, more than $1 billion has reportedly been recovered on behalf of the state’s pension funds.
