Shares of US bank Morgan Stanley (NYSE:MS) sank by more than 6% on Thursday after it agreed to pay US$3.2bn to settle federal and state charges it misled investors in residential mortgage-backed securities during the financial crisis.
The news came on a day when US banking stocks reeled from the aftermath of comments made this week by Federal Reserve chairman Janet Yellen that suggested concerns for global growth would stall rate hikes - and in turn put pressure on banks' profitability.
The Morgan Stanley settlement came a month after another bank, Goldman Sachs (NYSE:GS), agreed to pay US$5.06bn to resolve civil claims related to the firm’s securitisation, underwriting and sale of residential MBS from 2005 to 2007.
Morgan Stanley and Goldman Sachs are the last two of the large banks to settle their part in the 2008 financial crisis - and have attracted among the smallest of the penalties. In 2014, Bank of America paid up US$16.6bn and in 2013 JP Morgan Chase paid US$13bn.
The financial crisis led to an interbank crisis of confidence that year and the subsequent government debt crisis in Europe and beyond.
Morgan Stanley shares were down 6.6% at US$21.20 - their lowest since April 2013.
Meanwhile, among other banks to feel the heat of Yellen's comments included Goldman, whose shares were down 5.26% at US$139.49, Bank of America (NYSE:BAC) down 7.3% at US$11.06, and JP Morgan Chase (NYSE:JPM) down 4.5% at US$53.02.