SocGen to settle U.S. mortgage claims
French bank will pay US$50M following probe
• Société Générale SA agreed to pay US$50 million to resolve U.S. allegations that it misrepresented the value of a residential mortgage-backed security to investors.
The investors in SG Mortgage Securities Trust 2006OPT2, which included federally insured financial institutions, instead suffered “significant losses,” the U. S. said in a statement Friday.
Société Générale’s settlement with the Justice Department was announced by Brooklyn U. S. Attorney Robert Capers in the final moments of the Obama administration, just before President Donald Trump took over in Washington. The Paris-based bank became the 10th financial institution to reach a deal in probes over the subprime mortgage bonds that fuelled the 2008 financial crisis.
Earlier this week, the Justice Department announced larger deals, including a US$ 7.2- billion settlement with Deutsche Bank AG and a US$ 5.3- billion agreement with Credit Suisse Group AG. The government has extracted about US$ 60 billion in penalties from banks and ratings companies over how the bonds were packaged, rated and marketed.
Those investigations are the product of a working group of prosecutors and other officials that president Barack Obama created in 2012. UBS Group, Royal Bank of Scotland, HSBC Holdings and Wells Fargo & Co. are still under investigation in the U.S.
Société Générale, France’s second-largest bank by market value, misled investors when it said the pool 3,797 mortgage loans in the security met underwriting guidelines and had an original value of US$780 million, according to the U.S.
The bank didn’t tell investors its employees had received information that a substantial number of the loans that were securitized didn’t comply with underwriting guidelines, the government said. An outside vendor found that almost 40 per cent of the loans that it reviewed didn’t meet U. S. guidelines for securitization, Capers said in a statement.
The U.S. said the bank also agreed to co-operate with any ongoing investigations. In a separate statement Friday, Société Générale called it a legacy matter that involved a business it hadn’t been affiliated with since 2008.
Société Générale knew there were industry- wide problems in the issuance of subprime mortgages and a member of the bank’s Contract Finance group said “the whole process was a joke,” according to the U.S.
“It was not a ‘joke,”’ Capers said. “We will not tolerate investment banks making false representations to investors.”
WE WILL NOT TOLERATE INVESTMENT BANKS MAKING FALSE REPRESENTATIONS.