Business

Bank shares lead Wall Street fall

US stocks have closed lower, as bank shares fell on fears that Bank of America may be forced to buy back billions of dollars of mortgages.

Bank of America and other banks have been hit in recent weeks by accusations that they failed to review properly documents used in repossessions.

Shares in Bank of America fell 4.4%, while the Dow Jones index dropped 165 points to 10,978.62.

China's surprise decision to hike interest rates also weighed on markets.

The move raised concerns among investors about the impact of slower growth in the world's fastest-growing economy.

The broader Standard & Poor's 500 also fell 1.6% to 1,165.9, while the technology-based Nasdaq dropped 1.76% to 2,436.95.

Other lenders who saw their stock hit included Wells Fargo and JP Morgan, both down 1.3%, and Citigroup, which fell 2.6%.

White House warning

A group of investors is reported to have accused Bank of America of inappropriately bundling some mortgages into $16.5bn (£10.5bn) of bonds.

Bloomberg News said that money management firm BlackRock, bond investment fund Pimco and the New York Federal Reserve were among the investors, who want to force the bank to repurchase $47bn in mortgage bonds.

Separately, the White House warned banks that it would hold them accountable for any illegal mortgage practices, with US regulators set to meet on Wednesday to discuss the issue.

The Bloomberg report overshadowed better-than-expected earnings from the biggest US bank.

Earlier, it had announced a $7.8bn loss for the third quarter, largely thanks to a one-off charge designed to reflect the lower value of its credit and debit card business whose profits will be affected by new regulations.

Excluding the charge, the bank made a profit of $3.1bn, far better than analysts had forecast.

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