Credit Suisse was hit with two new lawsuits that threaten to open old wounds for its investment bank.
The Swiss bank faces a lawsuit claiming it and nine other big banks colluded to rig prices on smaller bond issues, «Reuters» reported. The plaintiffs allege the banks bilked them of billions by overcharging investors on so-called «odd-lot» trades, which make for the overwhelming majority of trading in corporate bonds.
Credit Suisse, which stands alongside other firms J.P Morgan, Bank of America, Barclays, Citigroup, Deutsche Bank, Goldman Sachs, Morgan Stanley, RBS, and Wells Fargo & Co. in the lawsuit, didn't comment. The lawsuit alleges the banks conspired over nearly 14 years.
«Garbage» and «Sludge»
Separately, the Swiss wealth manager was also hit with a $100 million legal claim over its sale of residential mortgage-backed securities ahead of the 2008/o9 financial crisis, according to «Law360» (behind paywall). The lawsuit, by a Jersey-based investment vehicle, adds to more than one dozen others that Credit Suisse faces on the same issue.
The bank comes away particularly badly in the latest lawsuit. The plaintiff claims Credit Suisse bankers referred to certain securitized loans as «crappy,» «garbage,» and «sludge,» which undercuts the bank's statements that the securities were properly reviewed and adhered to guidelines.
Lifted Legal Reserves
The RMBS scandal represents one of the biggest outstanding issues for Credit Suisse, which continues to grapple with the issue even after settling with U.S. justice officials three years ago. The bank lifted its reserves to deal with the legal issues by nearly one-third to 898 million Swiss francs ($925 million) last year.
It shifted 97 million francs that it had originally intended as a provision for its three-year restructuring concluded last year to its legal reserves. Under long-standing Chairman Urs Rohner, a former litigator, Credit Suisse is known to hit back on almost all probes the bank has been involved in, as finews.com wrote last week.
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