MercoPress. South Atlantic News Agency

HSBC reached 550m agreement with US banking regulators

“We are pleased to have resolved this matter,” Stuart Alderoty, the general counsel for HSBC North America, said in a statement.

HSBC Holdings will pay 550 million dollars to resolve a US regulator's claims that the British bank made false representations in selling mortgage bonds to the federal mortgage companies Fannie Mae and Freddie Mac before the financial crisis.

The settlement announced on Friday between the bank's US unit and the Federal Housing Finance Agency (FHFA), the regulator of the two government-controlled finance companies, came less than three weeks before a trial due to begin on 29 September in New York, where HSBC has said it could have faced up to 1.6bn in damages.

The deal is the latest arising from 18 lawsuits that the FHFA filed in 2011 to recoup losses on 200bn in mortgage-backed securities sold to Fannie Mae and Freddie Mac, which the US government took control of amid the 2008 economic crisis.

The lawsuit accused HSBC of falsely representing to Fannie Mae and Freddie Mac that loans underlying 6.2bn of mortgage-backed securities sold from 2005 to 2007 met underwriting guidelines and standards.

HSBC has denied the allegations, and did not admit wrongdoing as part of the settlement. The bank stopped issuing residential mortgage-backed securities in 2007.

“We are pleased to have resolved this matter,” Stuart Alderoty, the general counsel for HSBC North America, said in a statement.

Under the settlement HSBC will pay 374m to Freddie Mac and 176m to Fannie Mae, the FHFA said.

Along with settlements with other banks including Bank of America, Deutsche Bank and Morgan Stanley, the FHFA has recovered nearly 17.9bn to date. Last month, Goldman Sachs Group Inc agreed to a settlement that the FHFA valued at 1.2bn. Lawsuits remain pending against Nomura Holdings and Royal Bank of Scotland Group.