Bank of America may have to pay out more than $12 billion for mis-selling mortgage-backed securities in the run-up to the financial crisis.
The company has already paid out more than $25 billion in settlements since the financial crisis and is expected to spend half of the latest fine from the Department of Justice helping struggling homeowners pay their mortgages.
When the housing bubble burst in 2007, bundles of mortgages sold as securities soured and the investors who bought them lost billions. The US government subsequently set up a task force of federal and state law-enforcement officials to pursue wrongdoing by the banks. Combined with a separate, $9.5 billion fine from the Federal Housing Finance Agency in March, BoA’s total penalty for mortgage-related claims will now exceed the $13 billion paid by JPMorgan last year.
News of the fine, which first appeared in the Wall Street Journal, came as reports suggested that US authorities were at one point set to impose a fine as high as $16 billion on BNP Paribas for allegedly breaking US sanctions on countries including Cuba, Iran and Sudan.
The French lender is still expected to pay more than $10 billion and could also face other penalties in the US including a ban from dollar clearing, which would effectively bar it from trading assets like oil.
The regulatory clampdown has sparked outrage in France with US President Barack Obama rejecting an appeal from his French counterpart, François Hollande, to intervene. Hollande is believed to have raised the issue again with Obama last night when they met for dinner in Paris.
The bank’s chief operating officer, Georges Chodron de Courcel, is believed to be on a list of employees US authorities have said they want removed from the bank.
Ratings agency Standard & Poor’s has lost an appeal against an Australian court ruling, which found it misled investors by giving AAA ratings to toxic financial products. Experts said the decision, which centres on products created by ABN Amro, paves the way for similar court actions in Europe from investors who lost billions during the financial crisis. ABN was bought by Royal Bank of Scotland in 2007.