UBS Group announced on Monday (August 4th) that it has reached an agreement with the U.S. Department of Justice to pay $300 million to settle a mortgage-backed securities case left over from Credit Suisse.
This case dates back to the eve of the 2008 financial crisis when Credit Suisse was accused of misleadingly selling investment products based on high-risk mortgages, known as residential mortgage-backed securities (RMBS). After the subprime mortgage defaults crisis, the value of these securities plummeted sharply, causing investors to suffer huge losses.
Back in 2017, Credit Suisse reached a $5.7 billion settlement with U.S. authorities, pledging to pay fines and provide consumer compensation. However, some compensation obligations have not been fulfilled to this day.
The $300 million payment made by UBS this time will be used to complete the final compensation obligation from the 2017 agreement.
In a statement, UBS said, “Through this agreement, UBS has resolved yet another historical issue left by Credit Suisse. This is in line with UBS’s commitment to addressing historical issues in a fair and balanced manner, while considering the best interests of all stakeholders.”
In March 2023, under the leadership of the Swiss government, UBS urgently acquired the financially troubled Credit Suisse for about 3.2 billion Swiss francs. The acquisition was completed in June of the same year, officially merging Credit Suisse into the UBS Group, with UBS taking on a significant number of Credit Suisse’s legal and financial legacy issues.
Since the acquisition, UBS has been gradually resolving the backlog of legal disputes left by Credit Suisse over the years.
In May of this year, UBS paid $511 million to settle an investigation related to assisting wealthy Americans in tax evasion. In 2023, UBS also paid $1.44 billion to resolve its own investigation into mortgage-backed securities sales in the United States.
UBS expects that after the $300 million payment, the release of provisions for liabilities related to lawsuits will be able to release, and the related income will be recognized in the third-quarter financial report.