The settlement is the biggest ever pay-out by a bank to shareholders. It ends a legal dispute over whether low-income lender Household International made misleading statements about lending practices and the state of its accounts before it was acquired by HSBC.
HSBC bought Household International in 2003. But the £9.9 billion deal was followed by the bursting of the sub-prime bubble; leading to the discovery that many risky mortgages were worthless and would never be repaid.
Subsequent investigations led to the discovery that banks and other financial institutions’ pursuit of short-term gain was leading to predatory lending; with insufficient checks on borrowers. This led to mortgages being offered to people who had no ability to pay them back. Such mortgages were then bundled up and sold on, with massive efforts made to conceal the extent of the bad debt in the system.
Speaking as a firm involved in the biggest sub-prime mortgage prosecution in the UK in a decade, we can say with authority that it is hard to see HSBC as the victims here. They, like many banks, wanted a piece of the financial action in order to gain huge rewards – and the mess that resulted was left for everyone else to tidy up.