NEW Royal Bank of Scotland chief executive Ross McEwan was dealt a double blow last night as the part-nationalised lender was downgraded by a top ratings agency and made a $154 million (£95.5m) legal settlement with US regulators.
The 81% state-owned bank's RBS Securities division (RBSSI) paid $153.7m to settle charges laid by the US Securities and Exchange Commission (SEC) that it mis-sold $2.2 billion of sub-prime residential mortgage backed securities in 2007.
RBS said the fine, which will be used to compensate investors who lost money, is covered by existing provisions.
"The SEC complaint alleged that a prospectus statement that loans included in the offer were originated generally in accordance with lender guidelines was materially misleading. RBSSI neither admitted nor denied the allegations in the SEC complaint," the bank said.
George Canellos, co-director of the SEC's enforcement division, said: "In its rush to meet a deadline set by the seller of these loans, RBS cut corners and failed to complete adequate due diligence, with predictable results."
Meanwhile, Standard & Poor's downgraded RBS's long-term debt rating by one step to BBB+ from A-.
S&P said plans to create an internal "bad bank" for the riskiest assets would delay a return to profitability.
RBS said: "Given the neutral stance of the other agencies, we are disappointed with S&P's decision to downgrade our ratings."
Mr McEwan, who replaced Stephen Hester last month, is seeking to overhaul RBS to create a break with its past.
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