Credit Suisse set­tles New York state RMBS law­suit

The Financial Daily - - MARKET SUMMARY - ZURICH:

Credit Suisse has set­tled a 2012 New York state law­suit al­leg­ing mis­con­duct over res­i­den­tial mort­gage­backed se­cu­ri­ties (RMBS), with a source fa­mil­iar with the deal say­ing the bank would pay much less than pros­e­cu­tors had orig­i­nally sought.

The set­tle­ment, which was made last week, takes Credit Suisse a step closer to wrap­ping up an ex­pen­sive chap­ter linked to the fi­nan­cial cri­sis a decade ago, al­though some civil claims re­main un­re­solved.

"Credit Suisse is pleased to have set­tled this le­gacy case," the bank said in a state­ment, con­firm­ing the deal, though not what it is pay­ing in the pact with the New York State At­tor­ney Gen­eral's of­fice.

The source told Reuters on Mon­day the lat­est fig­ure the Swiss bank must pay re­lated to U.S. mort­gage-backed se­cu­ri­ties is in the low, two-digit mil­lions of dol­lars, con­firm­ing a week­end re­port in Swiss news­pa­per Ostschweiz am Son­ntag.

In what had been an $11 bil­lion com­plaint filed in No­vem­ber 2012, then-New York At­tor­ney Gen­eral Eric Sch­nei­der­man ac­cused Credit Suisse of mis­rep­re­sent­ing the qual­ity of loans un­der­ly­ing mort­gage-backed se­cu­ri­ties it sold in 2006 and 2007.

The New York AG's of­fice could not be reached for com­ment.

Credit Suisse shares were down 0.1 per­cent at 1145 GMT, while the Stoxx Europe 600 Bank­ing In­dex was down 0.5 per­cent.

Sch­nei­der­man had con­tended Credit Suisse's in­ap­pro­pri­ate mar­ket­ing of de­fec­tive bonds re­sulted in heavy in­vestor losses when the global fi­nan­cial cri­sis struck.

In June 2018, how­ever, New York State's high­est court lim­ited the scope of the case, say­ing the claims were sub­ject to a three-year statute of lim­i­ta­tions, not six years as Sch­nei­der­man had wanted.

In a pre­vi­ous set­tle­ment of charges by the U.S. Depart­ment of Jus­tice, Credit Suisse agreed to pay $5.3 bil- lion in fines and con­sumer relief af­ter the Zurich-based bank ac­knowl­edged home loans it pooled into the se­cu­ri­ties did not meet un­der­writ­ing guide­lines. The bank now says the to­tal sum may come to half that. [reut.rs/2VzMkxO ]

Nu­mer­ous other banks have paid bil­lions to re­solve fed­eral and state RMBS-re­lated claims, in­clud­ing JP Mor­gan, Citi, Bank of Amer­ica, Mor­gan Stan­ley, Gold­man Sachs and UBS.

Last May, Royal Bank of Scot­land agreed to pay $4.9 bil­lion to set­tle a U.S. mort­gages in­ves­ti­ga­tion. In March, it reached a $500 mil­lion set­tle­ment with New York.

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