Credit Suisse says it has clinched a billion-dollar U.S. settlement over how it sold securities made up of dud mortgages to investors in the run-up to the financial crisis.
The litigation over mortgage securities is one of the last large chunks of litigation hanging over Zurich-based Credit Suisse (CS) – a vestige of the years before the financial crisis of 2008-09, when the bank was a Wall Street powerhouse.
U.S. rivals and most recently Deutsche Bank have paid billions to settle legal problems which have ensued from the practice of selling toxic securities up to 2007.
Fine and Amends
For CS, the matter will cost $5.28 billion to set aside: the bank will pay $2.48 billion to U.S. authorities according to an agreement in principle reached on Friday. The bank will also pay $2.8 billion in so-called consumer relief – making amends to retail clients who lost money on the deals – over the next five years.
The bank said it will take a $2 billion charge on top of existing reserves against fourth-quarter results in order to resolve the matter.
While the fine is on the order of what analysts had expected, the relief component is spread over several years, giving Credit Suisse some leeway not to cough up the entire sum at once.
UBS Pending
Earlier on Friday, Frankfurt rival Deutsche Bank also settled a similar probe into mortgage security selling, by paying $7.2 billion – far lower than the $14 billion originally vaunted by U.S. officials.
American investment banks including Goldman Sachs have paid billions to settle similar probes; UBS and Barclays now remain the last major European banks with probes into residential mortgage-backed securities still pending.
In October, Credit Suisse also put to rest the last vestige of its 2013 settlement with U.S. officials over helping wealthy Americans cheat on their taxes, paying a $90 million fine to the securities regulator.
