Global banking giant HSBC has agreed to pay $1.58bn to settle a class-action lawsuit that stemmed from its acquisition of a US sub-prime lender more than a decade ago.


In a lawsuit filed in 2002, investors alleged that Household International and its three executives had made misleading statements about the company mortgage-lending practices, inflation its share price.

HSBC acquired Household International, which is now known as HSBC Finance, for nearly $14.2bn in 2003.

The settlement is expected to result in a pretax charge to HSBC Finance of approximately $585m, including legal fees and expenses, in the second quarter of 2016.

Earlier, the bank had estimated its potential exposure at about $3.6bn.

However, the settlement is subject to court approval.

In 2012, a federal jury ruled in favor of plantiffs, saying that the executives of Household International made recklessly misleading comments, Bloomberg reported.

In May 2015, the US Court of Appeals for the Seventh Circuit reversed a partial final judgment against Household International Inc., the predecessor entity to HSBC Finance, and remanded the case for a new trial on loss causation and damages.

Separately, HSBC agreed to pay $35m to settle a lawsuit that claimed the bank had conspired with other banks to rig the yen Libor and Euroyen Tibor benchmark interest rates, Reuters reported.

Investors including the California State Teachers' Retirement System and J. Kyle Bass' hedge fund Hayman Capital Management alleged that the banks had resorted to manipulating the indices for their gain from 2006 through at least 2010.

In February, HSBC agreed to pay $470m to settle allegations that it involved in abusive mortgage practices before seizing the homes of borrowers who defaulted as a result of financial crisis.

Image: HSBC headquarters, London, 8 Canada Square. Photo courtesy of HSBC.