As predicted by UBS on Thursday, the U.S. has filed a civil complaint against the bank for its business with mortgage-backed securities. The justice department hasn’t yet put a figure to its claim.
The Department of Justice didn’t mince its words in the complaint it filed against UBS: the Swiss bank is alleged to have misled and defrauded its clients and contributed to the financial crisis with the sale of residential mortgage-backed securities. The investors suffered «catastrophic losses,» said United States Attorney Richard P. Donoghue in the statement by the DoJ.
The justice ministry didn’t say how much it will claim from the Swiss bank. The products sold were worth a total $41 billion and sources said that the demand may amount to $2 billion. In the reports by news agencies, insiders are cited saying the bank had rejected a settlement offer of that amount.
UBS to Fight Allegations
The U.S. federal law stipulates penalties up to the amount of what was lost due to the alleged wrongdoing. UBS already said it will fight the allegations in court and that the claims weren’t supported by the law.
The Swiss bank added that it also suffered massive losses on the mortgage-backed securities and therefore hardly had defrauded its investors on purpose.
Last of the Global Banks
UBS is the last of the global banks yet to settle the matter. Credit Suisse for instance had to pay $5.28 billion dollars, $2.5 billion of which as a fine.
The prosecution in the U.S. put a high emphasis on how UBS conducted its business, placing higher emphasis on generating a profit than to informing investors in a transparent fashion.
Provisions for Legal Purposes
The reaction by UBS to the complaint filed by the DoJ may in part reflect the fact that its isn’t a criminal lawsuit.
The bank currently has set aside 2.3 billion Swiss francs ($2.3 billion) for legal purposes, an amount that may not fully cover all demands should it be convicted in France for instance.
