Major banks facing US legal action

22 May 2012

A group of major global banks are facing legal action from the US government over their actions in the mortgage industry at the height of the global economic slump.

It has been announced today (22 May) that the Federal Deposit Insurance Corporation (FDIC) is suing a number of household names in the financial industry - including Bank of America, Deutsche Bank and JP Morgan.

The FDIC is seeking combined damages worth $92 million from the lenders on the grounds they are alleged to have not properly represented the risks of residential home loans in 2009.

As a result, two small Illinois banks purchased bad securities from their larger counterparts in the industry - which then led to investors suffering losses - and lawsuits have now been filed to federal courts to recover these sums.

Last week (18 May), Fitch Ratings estimated that a group of 29 global banks - such as Barclays and HSBC - could need an extra $566 billion in capital to meet the incoming Basel III regulations.

By Asim Shah

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