The Swiss investment bank will make an upfront payment of $495m to resolve claims related to more than $10bn of RMBS, which ends the company’s largest outstanding RMBS litigation case, with five remaining at several stages
Credit Suisse headquarters in Zürich, Switzerland. (Credit: Roland zh/Wikipedia)
Credit Suisse has signed an agreement with the New Jersey Attorney General (NJAG) to resolve legacy cases related to its Residential Mortgage-Backed Securities (RMBS) business in the US.
Under the terms of the settlement, the Swiss investment bank will make an upfront payment of $495m to resolve claims related to more than $10bn of RMBS.
The settlement ends the bank’s largest outstanding RMBS litigation case, filed in 2013, while five other cases remain at various stages of litigation.
In the lawsuit, NJAG alleged that Credit Suisse had misled investors and engaged in fraud with respect to the offer and sale of RMBS, and claimed more than $3bn in damages.
The remaining cases are expected to be resolved in the coming six months, and cost a total of less than $100m, reported Reuters.
The bank has been paying billions of dollars to resolve legal cases linked to its RMBS business, for its conduct up to the 2008 financial crisis.
In addition, the bank is trying to recover from its other errors, including losing more than $5bn from the collapse of investment firm Archegos last year, said the publication.
Credit Suisse, in its statement, said: “Credit Suisse is pleased to have reached an agreement that allows the bank to resolve the only remaining RMBS matter involving claims by a regulator and the largest of its remaining exposures on its legacy RMBS docket.
“The settlement, for which Credit Suisse is fully provisioned, marks another important step in the bank’s efforts to pro-actively resolve litigation and legacy issues.”
In a separate development, Credit Suisse is reportedly looking for the potential sale of its asset-management operations in the US and to secure financing for its other businesses.
The Swiss bank has recently commenced the sales process for the US operations of Credit Suisse Asset Management (CSAM), reported Bloomberg.
The lender has not reached a final decision and could opt to hold onto the unit, said the publication citing anonymity to discuss internal considerations.
Earlier this month, Bank of America (BofA) entered into a $1.8bn settlement with insurance company Ambac Financial to resolve all the pending lawsuits.
The settlement ended BofA’s similar residential mortgage-backed securities (RMBS) case related to Countrywide, which collapsed during the 2008 financial crisis.