UBS to pay $1.4B to settle mortgage-backed securities case

investmentnews.com:

UBS Group AG agreed to pay $1.44 billion to settle a long-running case over US mortgage-backed securities, resolving one of the bank’s largest outstanding legal issues as it works toward integrating Credit Suisse. 

The settlement had been fully provisioned in prior periods, the Swiss bank said in a statement Monday. The case stems from a lawsuit filed by the US Department of Justice against UBS in relation to legacy residential mortgage-backed securities from 2006 and 2007 and related to the issuance, underwriting and sale of the securities, the bank said.

The agreement closes UBS’s biggest US legal headache, though remaining litigation over Libor, swap and stock-lending platforms and Bernard Madoff’s fraud could cost about $400 million to settle. The bank’s existing legal liabilities, which also include a French tax-evasion case, are now joined by lawsuits related to the acquisition of Credit Suisse. 

UBS has previously guided that legal liabilities related to Credit Suisse could run to as much as $4 billion over 12 months, and asset mark-downs could come in at some $13 billion. In June, UBS closed the acquisition of its stricken rival which handed the Swiss bank a potential windfall gain in the tens of billions of dollars after the government-brokered rescue.

In 2019, a federal judge in Brooklyn, New York, denied UBS’s bid to dismiss the suit, which the DOJ brought in 2018. It accused the bank off selling tens of billions of dollars of residential mortgage-backed securities by “knowingly and repeatedly” making false and fraudulent statements to investors about the loans backing them.

UBS removes a long-time legal overhang with no added expenses as it announces an agreement with the US Department of Justice to resolve