British banks now in the firing line after $13bn settlement for JPMorgan
Monday 21 October 2013
JPMorgan’s expected $13 billion (£8 billion) settlement with US regulators over selling mortgage-backed securities has turned the focus on British banks who are still under investigation.
Industry sources were surprised at the scale of punishment from the Federal Housing Finance Agency (FHFA) which is taking $4 billion of the JP Morgan settlement and is reported to be seeking a further $6 billion from Bank of America.
Three UK banks — Barclays, HSBC and taxpayer-controlled Royal Bank of Scotland — were named in the FHFA’s original list of 17 banks it was pursuing for allegedly mis-pricing or mis-selling mortgage backed securities to the US housing finance institutions Fannie Mae and Freddie Mac.
At the time the FHFA said the two organisations had bought securities costing $4.9 billion from Barclays, $6.2 billion from HSBC and $30.4 billion from RBS. The banks could be liable for the sale price less the securities’ current worth plus, possibly, interest which could have been earned on the difference.
All three banks have referred to the FHFA action in their regulatory filings, but one senior British banker said today: “We are not aware of anything imminent. It’s on our radar but not looming large.”
Bank analysts at Credit Suisse suggested that the UK banks might face considerably lower charges than their US counterparts.
In the summer Credit Suisse suggested it could cost RBS $1.6 billion, Barclays $1.1 billion and HSBC around $900 million.
However, the scale of the $4 billion expected to be paid by Jamie Dimon’s JP Morgan to the FHFA and the $6 billion being sought from Bank of America could push those numbers higher. So far the FHFA has settled cases with UBS for $885 million and with Citigroup and General Electic for undisclosed amounts, both reported to have been less than $1 billion.
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