Issues pertaining to pre-crisis business conducts continue to
haunt major global banks. Recently, a group of institutional
) and Pacific Investment Management Co. (PIMCO) sued six banks for
their alleged failure as mortgage-bond trustees for over $2
trillion worth of securities.
The six major banks are
Deutsche Bank AG
The Bank of New York Mellon Corporation
HSBC Holdings plc
Wells Fargo & Company
). The lawsuits, filed in the New York State Supreme Court, New
York County, seek unspecified damages for losses exceeding $250
billion on nearly 2,220 residential mortgage-backed securities
(RMBS) trusts. These RMBS trusts were issued between 2004 and 2008.
Apart from BlackRock and PIMCO, other investors joining the
Prudential Financial Inc.
), DZ Bank AG, Aegon N.V. and
Per the lawsuits, these banks allegedly breached their fiduciary
duties as trustees despite knowing that RMBS trusts held
substantial number of sub-standard loans. Further, the banks
are accused of failing to invoke their rights in order to force
loan originators and bond issuers to buy back these RMBS trusts.
For these banks, the above-mentioned lawsuits are yet another
addition to their ongoing legal problems. Further, banks across the
globe have been facing increasing scrutiny of their business
practices in the years prior to the financial crisis. Many of the
banks have paid billions of dollars as fines and compensation to
settle lawsuits and probes against them.
Many investors have lost their hard-earned money as a result of
such business malpractices by the banks. These lawsuits and their
success will restore their confidence in the law-enforcement
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