LOS ANGELES – British banking giant HSBC has agreed to pay $765 million to resolve allegations it passed on toxic mortgage securities to investors prior to the global financial crisis, federal prosecutors announced Tuesday.
Between 2005 and 2007, HSBC staff knowingly packaged low-grade loan pools with high rates of default into mortgage-backed securities — despite warnings from its internal risk management team and outside reviewers — according to the U.S. Attorney’s Office in Colorado.
“HSBC made choices that hurt people and abused their trust,” Bob Troyer, U.S. Attorney for Colorado, said in a statement.
“When HSBC saw problems, it chose to rush those deals out the door. When deals went south, investors who trusted HSBC suffered.”
Despite reaching the settlement, HSBC disputes the allegations, according to the Justice Department. A spokesman for the bank did not immediately respond to a request for comment.
The statement also did not specify the value of securities involved or the extent of losses that investors suffered.
HSBC in December completed a five-year deferred prosecution agreement with the Justice Department after admitting in 2012 to widespread money laundering offenses and sanctions violations for which it paid $1.9 billion.
Ten years after the crisis, the Justice Department has also faced stinging criticism from lawmakers and the public for opting to seek corporate fines instead of prosecuting any senior financial executives for their actions ahead of the crisis.