Bank of America and US authorities has reached to the settlement that it will pay $16.7bn (£10bn) to US authorities for misleading investors about the quality of loans it sold. The settlement will cut the bank's third-quarter profits by $5.3bn. The associate attorney general said "no institution is either too big or too powerful to escape" punishment.
On Wall Street, shares in Bank of America opened 1.5% higher following the settlement.
It is considered a historic step forward. The cash component consists of a $5 billion civil penalty and $4.63 billion in compensation payments.
Before Bank of America bought the loans in 2008, these loans were sold by Countrywide Financial and Merrill Lynch.
Much of which will go towards homeowners struggling with their mortgages and Bank of America will provide consumer relief worth about $7 billion and pay a total of $9.65 billion in cash.
There is intense focus on Merrill Lynch selling mortgage loans to investors without explaining the full extent of the risk involved and Countrywide Financial lending biggest amount at the time of the crisis.
"We believe this settlement, which resolves significant remaining mortgage-related exposures, is in the best interests of our shareholders, and allows us to continue to focus on the future" Brian Moynihan, chief executive of the bank, said.
It's a step to hold Wall Street accountable for the bad conduct that led to the financial crisis. And the sums involved in Bank of America's settlement dwarf the $13bn paid by another banks, JP Morgan to resolve a similar matter. The penalty exceeds Bank of America's entire profits last year yet this deal brings a measure of closure. This settlement of bank was the biggest remaining hurdle of all cases. The bank has already paid tens of billions of dollars to settle cases related to the financial crisis.
Bank of America paid $9.5bn to settle charges that it misled US mortgage lenders Fannie Mae and Freddie Mac over mortgage securities, in March this year .
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