Another chapter closes in Credit Suisse legacy cleanup
In a Monday announcement, UBS Group AG said it has reached an agreement to pay $300 million to resolve Credit Suisse’s outstanding consumer relief commitments from a 2017 settlement concerning residential mortgage-backed securities (RMBS).
Resolving legacy issues
The settlement with the Justice Department (DOJ) resolves all of Credit Suisse’s remaining consumer relief obligations from the 2017 agreement, the bank announced. In a statement, UBS said the agreement aligns with its “intention to resolve legacy matters at pace in a fair and balanced way and in the best interest of all its stakeholders.”
As a result of this settlement, UBS anticipates recording a credit in its non-core and legacy segment during the third quarter of 2025, RTTNews reported. This credit reflects the release of a contingent liability that was established when UBS acquired Credit Suisse. The acquisition, a government-orchestrated deal valued at $3.25 billion, was finalized in August 2023.
Credit Suisse’s 2017 settlement
The original 2017 settlement saw Credit Suisse agree to pay $5.28 billion for its conduct related to the sale of RMBS between 2005 and 2007, according to Banking Dive. This included a $2.48 billion civil penalty to the US government and $2.8 billion in other forms of relief, such as loan modifications for struggling homeowners, loan forgiveness, and funding for affordable housing projects.
The DOJ had alleged that Credit Suisse knowingly purchased and securitized low-quality mortgage loans and misrepresented the risks associated with these securities to investors. This settlement was part of a broader effort by US authorities to hold financial institutions accountable for their role in the 2007-08 financial crisis.
Broader legacy costs
UBS’s recent settlement is one of several legacy cases it inherited through the acquisition of Credit Suisse. In August 2023, UBS settled its own RMBS case with the DOJ for nearly $1.4 billion. Additionally, in July of the same year, the Federal Reserve fined UBS $268.5 million due to “unsafe and unsound counterparty credit risk management practices” between Credit Suisse and the now-defunct investment fund Archegos, which cost Credit Suisse approximately $5.5 billion in March 2021.
Bloomberg Intelligence had estimated that UBS might incur an additional $500 million in costs to resolve remaining legacy Credit Suisse cases. Other inherited cases include a settlement with Mozambique in October 2023 related to the 2013 “tuna bonds” scandal and a roughly $511 million settlement in May concerning Credit Suisse’s role in helping taxpayers hide assets in offshore accounts.
What are your thoughts on how this merger will impact UBS’s future financial wealth? Share your insights in the comments below.
