Bank of America is to pay $16.65 billion (12.53 billion euros) as a settlement of charges that it misled investors into buying dodgy mortgage-backed securities.
It is the largest fine ever levied by US authorities on a single company and $7 billion (5.27 billion euros) will go to help home buyers who are having trouble paying their mortgages and towards demolishing derelict properties in communities blighted by the sub-prime mortgage mess.
Investors, including state pension funds, will also be compensated.
Prosecutor Tony West said: “This is one of the largest consumer relief packages we have ever assembled with a single financial institution and its impact could benefit hundreds of thousands of Americans who are still struggling to pull themselves out from under the weight of the financial crisis.”
Bank of America admitted concealing key facts about billions of dollars of risky mortgage-backed securities it sold in the run up to the financial crisis.
This settlement does not cover potential criminal charges against the bank, however no high-level bank executives have been prosecuted or jailed over the sub-prime mortgage scandal.
While Bank of America’s settlement is expected to be the largest, charges could still be brought against Credit Suisse, Britain’s Royal Bank of Scotland and others, people familiar with the probes have told Reuters.