Credit Suisse Pays $495 Million to Settle Old US Case

  • Settlement ends RMBS’ largest pending case
  • Credit Suisse says the settlement is fully covered by provisions
  • The bank still has five issues to solve
  • Expects to resolve outstanding issues in the next six months

ZURICH (Reuters) – Credit Suisse (CSGN.S) has agreed to pay $495 million to settle a case involving mortgage-related investments in the United States, the latest payment related to past mistakes to hit the Swiss. Bank reputation.

The lender was paying billions of dollars to resolve legal cases associated with the residential mortgage-backed securities (RMBS) business in the lead-up to the 2008 financial crisis.

The decrease in mortgage payments has led to a decrease in the value of assets, which has led to huge losses for investors.

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Switzerland’s second largest bank is trying to move away from these old problems that have hampered its performance and cost it billions of dollars.

The bank is also trying to recover from other missteps, including losing more than $5 billion from the collapse of investment firm Archegos last year, when it was also forced to suspend client funds linked to defunct financier Greensell Capital.

In a recent RMBS case, brought by the New Jersey Attorney General, Credit Suisse allegedly “misleaded investors and engaged in fraud or deception in connection with the offer and sale of RMBS.”

The attorney general’s office had demanded more than $3 billion in damages in a 2013 case.

“Credit Suisse is pleased to have reached an agreement allowing the bank to resolve the only remaining RMBS matter involving claims by a regulator,” the bank said in a statement.

“The settlement, which is being provided entirely to Credit Suisse, represents another important step in the bank’s efforts to proactively resolve litigation and inheritance issues.”

The Swiss bank Credit Suisse logo appears at its headquarters in Zurich, Switzerland on October 4, 2022. REUTERS/Arnd Wegmann/File Photo

Credit Suisse said the New Jersey case was the largest of its remaining exposures to RMBS’ old business, with five remaining cases in various stages of litigation.

A person familiar with the matter told Reuters that these problems are expected to be resolved in the next six months. The source added that the total cost would likely be well under $100 million.

RMBS are debt-based securities, seen as similar to bonds, that are backed by interest paid on home loans bundled together to sell to investors.

But RMBS’s poorly built shares of the 2008 financial crisis – when broader groups of mortgages defaulted, leading to huge losses.

Credit Suisse, whose share price has more than halved in the past 12 months, has already made huge payments to settle product claims, including a $5.3 billion deal with the Department of Justice in 2017.

It said at the time that the products it sold did not meet underwriting guidelines.

It also paid $600 million to MBIA Inc last year after the New York-based municipal bond insurer paid hundreds of millions of dollars to compensate investors.

The bank, one of Europe’s largest and a Swiss bank of global systemic importance, is due to release details of an expected strategic review along with third-quarter results on October 27.

In June, the bank was found guilty of failing to prevent money laundering by a Bulgarian cocaine-smuggling ring, while a Bermuda court ruled that a former Georgian prime minister and his family owed more than half a billion dollars in domestic life insurance from Credit Suisse’s arm.

The US Department of Justice is also investigating whether Credit Suisse continued to help US clients hide assets from authorities, eight years after the Swiss bank paid a $2.6 billion tax evasion settlement.

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(Reporting by John Revell and Oliver Hurt) Editing by Kirsten Donovan, Mark Potter and Jane Merriman

Our Standards: Thomson Reuters Trust Principles.

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