Swiss banking giant UBS and several of its U.S. affiliates agreed to pay $1.44 billion as part of a settlement with the Department of Justice (DOJ) regarding the underwriting and issuance of residential mortgage-backed securities (RMBS) in the lead up to the 2008 financial crisis.
The settlement, announced Monday, resolves the last case brought by the DOJ related to big banks and their issuance of RMBS in the years prior to 2008. The agency said it secured more than $36 billion in penalties regarding conduct that fueled the financial crisis.
The case against UBS was brought in November 2018, alleging the bank defrauded investors in the sale of 40 RMBS issued in 2006 and 2007.
“[C]ontrary to UBS’ representations in publicly filed offering documents, UBS knew that significant numbers of the loans backing the RMBS did not comply with loan underwriting guidelines that were designed to assess borrowers’ ability to repay,” the DOJ said. UBS was aware of this issue and other problems with the loans because of its own due diligence efforts, the agency alleged.
“UBS’ conduct at issue in this case played a significant role in causing a financial crisis that harmed millions of Americans,” said U.S. Attorney Ryan Buchanan in the DOJ’s press release. “We will continue to seek accountability when financial institutions—large or small—misrepresent vital information to investors and undermine trust in our public markets.”
Among other banks to have previously settled with the DOJ regarding RMBS was recent UBS acquisition Credit Suisse, which agreed to pay $5.3 billion in January 2017.
UBS acknowledged its settlement with the DOJ in a statement, saying the total was “fully provisioned in prior periods.”
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