ALEXANDRIA, Va.– NCUA said it 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.
A settlement agreement has been reached, the agency said, adding that once payment is made NCUA’s recoveries from various financial institutions will reach $4.3 billion.
“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 said it 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 reported it 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.
NCUA said it 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.
NAFCU thanked Metsger and Board Member Mark McWatters for their "continued leadership on this critical issue. We appreciate NCUA’s persistence in pursuing recoveries, which have now grown to $4.3 billion, on the sale of faulty securities that led to the downfall of five corporate credit unions,” said NAFCU President and CEO Dan Berger. “NAFCU will continue to urge the agency to pursue its diligent legal recovery efforts and to be fully transparent in how and when the funds recovered will be refunded to credit unions.”
NAFCU said it also continues to urge NCUA to pursue all avenues available to offset the costs for credit unions of corporate stabilization.