ALEXANDRIA, Va. (Sept. 27, 2016) – The National Credit Union Administration will receive $1.1 billion to settle legal claims against Royal Bank of Scotland arising from the sale of faulty mortgage-backed securities to two corporate credit unions, the agency announced today.
A settlement agreement was reached, and once payment is made, NCUA’s recoveries from various financial institutions will reach $4.3 billion.
NCUA was the first federal financial institutions regulator to recover losses from investments in these securities on behalf of failed financial institutions. Net proceeds from recoveries are used to pay claims against five failed corporate credit unions, including those of the Temporary Corporate Credit Union Stabilization Fund.
“NCUA is pleased with today’s settlement and fully intends to stay the course in fulfilling its statutory responsibilities to protect the credit union system and to pursue recoveries against financial firms that we maintain contributed to the corporate crisis,” NCUA Board Chairman Rick Metsger said.
The settlement covers claims asserted in 2011 by the NCUA Board as liquidating agent for Western Corporate Federal Credit Union and U.S. Central Federal Credit Union in federal district courts in California and Kansas, respectively. In connection with the settlement, NCUA will dismiss its pending suits against RBS. RBS does not admit fault as part of the agreement. NCUA in 2015 accepted an offer of judgment from the bank for $129.6 million to resolve similar claims relating to securities sales to Members United and Southwest corporate credit unions.
NCUA still has litigation pending against other financial institutions, including Credit Suisse and UBS Securities, alleging they sold faulty mortgage-backed securities to corporate credit unions. NCUA also has pending litigation against various residential mortgage-backed securities trustees and LIBOR banks related to corporate credit union losses.
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