US hints at delay to huge bank fines for mortgage mis-selling

A series of huge fines from US regulators for mis-selling mortgage securities could be delayed until after next month's presidential election, dealing a blow to Royal Bank of Scotland (LSE: RBS.L - news) 's (RBS's) hopes of finalising a settlement by the end of the year.

Sky News has learnt that Department of Justice (DoJ) representatives have signalled in recent days that the imposition of penalties on Barclays (LSE: BARC.L - news) , Credit Suisse (LSE: 0QP5.L - news) and Deutsche Bank (LSE: 0H7D.L - news) may not be concluded until closer to the arrival of the new US administration in January.

Reports last month suggested that regulators wanted to finalise a so-called omnibus settlement against the three banks before November's election.

That scenario remains a possibility, but one senior banker said this week that it was now becoming more likely that an announcement from the DoJ could slip beyond next month if it remained intent upon settling with all three banks simultaneously.

The focus of the DoJ's investigations has been on Deutsche Bank, with the regulator's initial suggestion of a $14bn fine in September sending the German lender's shares plunging and sparking fears for its survival.

Deutsche's shares have since rallied, despite the insistence of Berlin that it would not intervene to prop up the bank.

The German bank will report quarterly results on Thursday, with investors hoping for an update on the DoJ discussions.

Barclays and Credit Suisse are also facing hefty fines, while RBS had hoped to resolve its own settlement with the DoJ this year in an attempt to draw a line under historic misdemeanours.

The DoJ probe into the mis-selling of residential mortgage-backed securities - which were sold to investors as safe despite frequently consisting of loans that would never be repaid - is the largest outstanding investigation into many of the banks which have yet to settle.

To date, the DoJ has settled with a handful of US-based banks, including Bank of America (Swiss: BAC-USD.SW - news) , Goldman Sachs (NYSE: GS-PB - news) and JP Morgan, extracting a total of over $40bn.

The likely delay to a settlement for RBS means it is likely to have to account for the majority of the fine in its 2017 results, making it virtually certain that the bank will record its tenth consecutive annual loss.