Patricia Leonard reviews the latest controversy to hit the banking industry
Banks in Britain, and abroad, have been subject to a fresh onslaught in recent weeks. British banks have found themselves subject to expansive and costly litigation, investigations by the Serious Fraud Office (SFO) and responding to the Basel III rules.
Three British banks—RBS, Barclays and HSBC—are among the 17 being sued in a multibillion pound lawsuit for allegedly mis-selling mortgage-backed securities by the US Federal Housing Finance Agency (FHFA). These were filed just as the limitation period was coming to an end and took the market by surprise, causing an immediate drop in share prices.
Some of the banks involved are already negotiating in the US with the attorneys general of all 50 states because of an investigation addressing mortgage abuse, making it more unlikely that a global settlement can be achieved. That these settlement negotiations are taking place in the US before a full investigation into mortgage abuses has even been completed shows how willing banks are to stave off costly litigation as soon as possible, despite robust denials of any malpractice.
