Major banks continue to be embroiled in legal hassles related to the sale of risky residential mortgage backed securities (“RMBS”). On Thursday, Swiss Bank – Credit Suisse Group AG CS agreed to a settlement by paying $29 million to the U.S. regulator for credit unions – National Credit Union Administration (NCUA) – related to the RMBS lawsuit.
The agreement, disclosed in a filing in the federal court in Manhattan, pertains to resolving one out of the numerous lawsuits filed by the NCUA associated with the sale of MBS prior to the 2008 financial crisis. Notably, the settlement resolves claims by Members United and Southwest corporate credit unions due to losses associated with the purchase of RMBS for more than $228.8 million from 2006 to 2007.
However, another case is pending against Credit Suisse in a federal court in Kansas related to the sale of defective RMBS to U.S. Central and Southwest corporate credit unions.
“NCUA will continue to meet its statutory obligation to secure recoveries for credit unions and ensure consumers remain protected,” NCUA Board Chairman Debbie Matz said. “We will continue to aggressively pursue recoveries against Wall Street firms that contributed to the corporate crisis with the goals of minimizing net losses of the corporate crisis and providing a future rebate to credit union.”
Notably, NCUA has recovered more than $2.5 billion in legal issues related to securities cases and used these proceeds to pay claims against five failed corporate credit unions.
Credit Suisse is not the only major global bank to be sued by the NCUA. Bank of America Corporation BAC and U.S. Bancorp USB were also sued by the NCUA for recovering losses on $5.8 billion worth of RMBS. In 2013, the regulator had sued nine banks including Morgan Stanley MS and Barclays PLC.
Banks across the globe have been facing increasing scrutiny for their business practices. Many of the firms have paid billions of dollars as fines and compensation to settle lawsuits and probes. Such settlements help restore their confidence in law-enforcement agencies. Moreover, it reduces the existing litigation burden of banks.
On the other hand, recoveries by the NCUA will lower the losses that stemmed from the failure of the credit unions.
Currently, Credit Suisse holds a Zacks Rank #5 (Strong Sell).
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