Zurich, Switzerland—Credit Suisse said Monday it would pay $495 million as part of a deal reached with US prosecutors in a long-running dispute over mortgage-backed securities, settling one of the last legal cases dating back to the 2008 financial crisis.
The European lender said in a statement it had agreed with New Jersey authorities to make the “one-time payment… to fully resolve claims” for compensation, and said it had already provisioned the amount.
In the claim filed in 2013, Credit Suisse was criticized for not having provided sufficient information on the risks relating to $10 billion of mortgage-backed securities.
Switzerland’s second-biggest bank said Monday that the agreement “marks another important step in the bank’s efforts to pro-actively resolve litigation and legacy issues.”
“Credit Suisse is pleased to have reached an agreement that allows the bank to resolve the only remaining RMBS [residential mortgage-backed securities] matter involving claims by a regulator and the largest of its remaining exposures on its legacy RMBS docket,” the statement said.
Subprime mortgages, credit granted to borrowers often with poor credit histories or insufficient income, were packaged into financial products and sold to investors.
But as borrowers defaulted on many of those mortgages, investors had no way to tell what portion of the loans in the derivatives were bad. Those products were at the heart of the 2008 financial crisis, which sparked a global recession and brought the international financial system to the brink of collapse.
Last year, Credit Suisse paid $600 million to financial guarantee insurer MIBA to settle other long-running litigation connected to the US subprime mortgage crisis
Credit Suisse said last January it was increasing the provisions set aside for the MBIA case and others involving mortgage backed securities by $850 million.