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RBS says there will be no quick settlement to £5bn lawsuit

THE ROYAL Bank of Scotland has said there will be no early settlement in a dispute with shareholders who are making legal claims of up to £5 billion against the institution.

RBS chief executive Ross McEwan has told investors the bank will go to court to fight the lawsuit brought by a shareholder group over claims the lender did not fully disclose its true financial health prior to a £45 billion Government bailout in 2008.

Several groups of investors ranging from private individuals to finance giants such as Standard Life are seeking compensation.

After the announcement of RBS's first-quarter results for 2014, Mr McEwan said: "We understand their issues, but we believe we have strong defences to the claims and that is why we intend to defend these vigorously.

"That's the reason why these things will be set out in court rather than in an early settlement: we have a good defence on this," said McEwan.

It had been thought by some that RBS would seek early settlement as a court case could hinder efforts to re-privatise the 81% state-owned institution. It will face a huge legal bill to fight the case in court.

RBoS Shareholders Action Group said it is ready to take the matter to court, and that due to unprecedented demand, it has extended the deadline for shareholders to join the action.

The new deadline for institutions is May 12 and for private investors May 9.

A spokesman for the group said: "We look forward to it going to court. We have filed the papers, we are into case management conferences, and it is just a matter of time before the case comes to court."

More than one thousand new private shareholders have joined the action over the past month, bringing the total number to more than 13,000.

RBS said in a statement that all the regulatory investigations and litigation related to its past conduct has "continued to create challenges and uncertainties for the bank".

It therefore was not currently able to predict how long or how much various cases will cost to settle or compensate.

The action group filed proceedings in London's High Court in April 2013 against former executives Fred Goodwin, Tom McKillop, Johnny Cameron, and Guy Whittaker, and the bank itself, alleging they were sold equity in a £12 billion share issue in 2008 under false pretences.

The fund-raising was aimed at shoring up its capital position after its deal to acquire Dutch bank ABN Amro. But despite the extra money, the bank had almost collapsed within months.

Four groups of shareholders have been formed under a December 2013 "Group Litigation Order" - a court order that means the claims will be managed collectively because they involve substantially the same matters of fact or law.

News of the second-largest group - comprising the institutional shareholders Legal & General, Standard Life, Aviva, Prudential, and the Universities Superannuation Scheme claiming a total of more than £1 billion in damages - emerged last week.

Mr McEwan said: "Major shareholders have a duty to pursue legal claims on behalf of their investments clients, if they decide the potential benefits outweigh the potential costs. We understand the issue. We believe we have strong defences against the claim brought against the bank."

RBS is also up against a range of investigations that could lead to more settlements or lengthy lawsuits.

The entire British banking industry is under investigation for current or former traders attempting to manipulate currency rates.

On top of that, RBS is also being investigated by the Financial Conduct Authority (FCA) after the regulator announced it is to probe Britain's banks' IT systems after a raft of glitches hit millions of customers across the industry.

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