Bank of America agrees $315m Merrill Lynch settlement

Bank of America has agreed to pay $315m to settle claims from investors who said they were misled by Merrill Lynch when they bought mortgage-backed securities in the run-up to the financial crisis.

The settlement is one of the highest ever agreed against a bank over the mis-selling of the securities, which were shown to be far riskier than presented when originally sold, as the US housing market collapsed.

The settlement resolves claims from investors led by the Public Employees' Retirement System of Mississippi pension fund.

They said Merrill misled them about the risks of $16.5bn of mortgage-backed securities in 18 offerings made between 2006 and 2007, before Bank of America bought the investment bank.

Bank of America is now fighting numerous legal cases relating to products sold both by Merrill and the mortgage lender Countrywide, which it bought in 2008, six months before buying Merrill.

The settlement was disclosed publicly late Monday night in court papers filed in the US district court in Manhattan. The accord requires approval by Judge Jed Rakoff.