Credit Suisse said Monday it would pay $495 million to settle a dispute over mortgage-backed securities from the 2008 financial crisis.
Switzerland’s second-largest bank said it had agreed with New Jersey authorities to make the “one-off payment … to settle claims in full” for compensation and said it had already provided the amount.
The lawsuit, filed in 2013, criticized Credit Suisse for failing to provide sufficient information about the risks associated with $10 billion in mortgage-backed securities.
Subprime mortgages, loans granted to borrowers often with bad credit or insufficient income, were packaged into financial products and sold to investors.
However, because borrowers defaulted on many of these mortgages, investors had no way of telling what portion of the loans in the derivatives were in default.
These products were at the heart of the 2008 financial crisis that triggered a global recession and brought the international financial system to the brink of collapse.
Credit Suisse said the final settlement with the New Jersey Attorney General enabled it to “resolve the only remaining RMBS (residential mortgage backed securities) matter, the claims of a regulator and the largest of its remaining exposures to its legacy RMBS list concerned”.
Shares rose after commenting on the SMI, the Swiss stock exchange’s flagship index.
Speculation is mounting ahead of an update the new chief executive has planned for later this month.
According to the Financial Times, the bank is considering not only selling its investment bank, but also some of its domestic operations in Switzerland.
– Fines from the financial crisis –
In January 2017, US authorities forced Credit Suisse to pay $5.28 billion for its role in the subprime crisis – three years after it was fined $2.6 billion for she had helped Americans avoid taxes.
Last year, Credit Suisse also paid $600 million to financial guarantee insurer MIBA to settle other long-running litigation related to the US subprime mortgage crisis.
The bank said last January it was increasing reserves for the MBIA case and others involving mortgage-backed securities by $850 million.
Even some of the world’s largest banks faced legal claims after the 2008 financial crash.
German banking giant Deutsche Bank agreed in December 2016 to pay $7.2 billion to settle a case with the US Department of Justice.
And British banking giant Barclays agreed to pay a $2 billion US fine in 2018 over a subprime mortgage derivatives fraud case.
Bank of America, meanwhile, agreed a $17 billion deal with US agencies in 2014 to settle claims it had sold risky mortgage securities as safe haven assets prior to the 2008 financial crisis.
