Banks face multi-billion fines on toxic mortgages

BRITAIN’S biggest banks are facing multi-billion-pound penalties after two European rivals were hit with fines of more than £10billion in a crackdown on the mis-selling of toxic mortgages.

Barclays, HSBC and the Royal Bank of Scotland are being pursued by the US Department of Justice over the scandal, which has been credited with starting the recession.

Deutsche Bank was yesterday hit with a £5.9billion bill for its part in the debacle, while Credit Suisse agreed to pay out £4.3billion.

Laith Khalaf, of analysts Hargreaves Lansdown, said: ‘The banks are paying the price for the financial crisis. But that was a decade ago and there are questions over why this has gone on so long.

‘It’s an ongoing risk for banking and the problem is it’s an unquantifiable one – as an analyst you can provide estimates for dividends and earnings, but it’s very difficult to model what a regulator is going to pull out of the hat when it comes to fines.’

Analysts believe NatWest owner RBS will be fined a similar amount. The bank is 73 per cent stateowned because of a £46billion bailout, meaning taxpayers will ultimately have to pay for any fine.

HSBC is also grappling with a justice department investigation, and Barclays is being taken to court over the issue after an attempt to reach a settlement broke down. The lender claimed it was being told to pay far too much. Justice department documents allege Barclays knew its mortgage bundles were high-risk and deceived investors.

The bank denies wrongdoing and says it will fight the Department of Justice. A spokesman added: ‘We have an obligation to shareholders, customers, clients, and employees to defend ourselves against unreasonable allegations and demands.’

City insiders have long been infuriated by what they see as an unnecessarily harsh approach to British banks by US watchdogs.

Some have even claimed that it is part of a co-ordinated effort to weaken rivals and give American finance firms a better shot at success.