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Bank lawsuit sends FTSE 100 plummeting

5th September 2011

A US lawsuit filed against British banks sent London's benchmark share index tumbling into the red on Monday morning.

The Federal Housing Finance Agency (FHFA) has filed claims against 17 institutions, including Royal Bank of Scotland (RBS) and Barclays, over the sub-prime mortgage catastrophe.

A decline of more than one per cent was seen on the FTSE 100 in early trading. Shares in RBS and Barclays both lost more than seven per cent, while HSBC shed more than one per cent.

According to reports, the three banks could be forced to pay out more than £5 billion in damages if the legal case against them proves successful.

The FHFA alleges the banks deliberately misrepresented the quality of home loans they sold to Fannie Mae and Freddie Mac, America's state-backed mortgage giants.

RBS is facing action over $30.4 billion (£18.7 billion) of sales.

An analyst told the Sunday Telegraph: "RBS clearly faces the most material cost from this and could be on the hook for hundreds of millions, if not billions, of dollars."

Posted by Andrew Cottrill

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