Banks react to Goldman MBS investigation

Author: Danielle Myles | Published: 20 May 2011

Banks have played down the implications of this month’s announcement that Goldman Sachs is undergoing criminal investigation by the Department of Justice (DoJ) for misleading customers over mortgage backed securities (MBS) sold during the financial crisis.

But experts predict criminal prosecutions against banks are not far away.

The allegations are the most serious against a leading bank’s selling practices during the crisis. A US bankers’ counsel said the investigation could lead to greater scrutiny of Chinese walls, but that this would have been the case irrespective of the bank under DoJ review.

"Banks are constantly engaged in policy review," he said. "Anytime a regulator takes action against any bank, people review procedures in place." There’s a balance to be struck...