UBS agreed to pay $300 million to settle a 2017 agreement Credit Suisse entered with the Justice Department over its legacy residential mortgage-backed securities business, the lender said Monday.
UBS’s agreement with the DOJ will resolve all of Credit Suisse’s remaining consumer relief obligations from the 2017 settlement, it said.
“With this agreement, UBS has resolved another of Credit Suisse’s legacy issues, in line with its intention to resolve legacy matters at pace in a fair and balanced way and in the best interest of all its stakeholders,” UBS said in a statement Monday.
UBS expects to record a credit in its non-core and legacy segment in the third quarter of 2025 from the release of a contingent liability that was established during the Credit Suisse acquisition process.
In January 2017, Credit Suisse agreed to pay $5.28 billion for its conduct over the sale of residential mortgage-backed securities between 2005 and 2007. Credit Suisse was required to pay $2.48 billion as a civil penalty to the U.S. government and $2.8 billion in other forms of relief like loan modifications for distressed homeowners, loan forgiveness and financing for affordable housing projects.
This 2017 settlement was part of a broader effort by U.S. authorities to hold financial institutions accountable for their role in the 2007-08 financial crisis. The DOJ alleged Credit Suisse knowingly purchased and securitized poor-quality mortgage loans and misrepresented the risks associated with these securities to investors.
In the years preceding the financial crisis, several big banks were involved in misconduct related to RMBSs. The DOJ recovered roughly $36 billion in civil penalties from 18 financial institutions in connection with mortgage-backed securities fraud in the run-up to the financial crisis.
UBS settled its own RMBS case with the DOJ for nearly $1.4 billion in August 2023, roughly four months after it bought Credit Suisse in a $3.25 billion government-orchestrated deal.
In July of that year, the Federal Reserve fined UBS $268.5 million over “unsafe and unsound counterparty credit risk management practices” between Credit Suisse and defunct investment fund Archegos. Credit Suisse failed to adequately manage the risk posed by Archegos despite repeated warnings that cost the Swiss bank roughly $5.5 billion in March 2021.
UBS’s Monday settlement is part of legacy cases that the bank assumed when purchasing Credit Suisse. Bloomberg Intelligence estimated UBS would pay $500 million in additional costs to settle remaining legacy Credit Suisse cases, including the one related to the Archegos collapse.
In another such case, Credit Suisse reached a settlement with Mozambique in the 2013 “tuna bonds” scandal, in October 2023. Though UBS did not disclose any financial details related to the deal, a source familiar with the matter told Reuters at the time that the acquirer would forgive part of a loan Credit Suisse made to Mozambique in 2013, representing less than $100 million. Mozambique had sought $1.5 billion in damages in relation to the scandal.
In May, UBS settled a decades-long probe for roughly $511 million into how Credit Suisse helped taxpayers hide assets and income in offshore accounts for more than a decade. Credit Suisse pleaded guilty to conspiring to hide more than $4 billion from the Internal Revenue Service in at least 475 offshore accounts, according to the DOJ.
