In a recent report by Bloomberg [1], HSBC Holdings is in talks to resolve a U.S. lawsuit over its sale of toxic mortgage bonds. If the decade-long crisis is settled, the case could be an advanced look into how the Trump Justice Department will deal with global banks and handle financial penalties.
HSBC has reportedly had at least one meeting with the Justice Department and is scheduled to meet again. If a resolution can be reached, it is still weeks or possibly months away from being determined. Due to the confidentiality of negotiations, the people providing this information must remain unidentified, Bloomberg reported.
The U.K. bank has previously faced three U.S. lawsuits accusing it of breaching its duties as a trustee overseeing residential mortgage-backed securities that suffered billions of dollars in losses in the global financial crisis.
In 2014, HSBC paid $550 million to settle a case with the FHFA involving mortgage bonds sold to Fannie Mae and Freddie Mac. According to Bloomberg, that separate matter has been resolved.
In 2016, the Justice Department reached a settlement with HSBC to provide more than $470 million in relief to consumers and payments to federal and state parties and to be bound to mortgage servicing standards, and be subject to independent monitoring of its compliance with the agreement, according to the U.S. Department of Justice [2].
For some banks, the consumer relief portion was worth more than half of the total penalties paid to the U.S. Treasury. In previous settlements, Deutsche Bank AG settled $7.2 billion in penalties, which included $4.1 billion in consumer relief.
It is uncertain how much money will be at stake for this new negotiation. However, it is also unclear if the past settlements will give any indication of results for future settlements.
With a new administration and under a new Justice Department policy, results for this next HSBC settlement are simply unpredictable.