UBS will ‘vigorously’ defend DoJ lawsuit over financial crash
The Swiss bank UBS has pledged to vigorously defend itself in a pending lawsuit by the US justice department, which has already clawed billions of dollars from lenders over the mis-selling of complex financial products that contributed to the 2008 financial crash.
The Department of Justice (DoJ) told UBS it planned to file a case as early as Thursday, which is set to focus on the sale of residential mortgage-backed securities (RMBS) in 2006 and 2007.
It comes hot on the heels of UBS’s $230m (£176m) settlement reached with the state of New York in March, following a probe into the bank’s packaging and sale of the financial products.
In a strongly worded statement, UBS said the DoJ’s claims “are not supported by the facts or the law”.
“UBS will contest any such complaint vigorously in the interest of its shareholders. UBS is confident in its legal position and has been fully prepared for some time to defend itself in court,” the bank said.
It said the bank itself was a victim, having “suffered massive losses” on investments in mortgage-related assets when the US housing market crashed. “This fact alone negates any inference that UBS engaged in an intentional fraud,” UBS said.
UBS is understood to have invested around $100bn in US RMBS-related assets and lost more than $45bn when the housing market collapsed.
While it is unclear how much the DoJ is hoping to sue for, the department has reached settlements worth billions of dollars over RMBS in the past year alone.
In March, Barclays agreed to pay $2bn in civil penalties to the DoJ, while Royal Bank of Scotland later reached a $4.9bn settlement after an investigation into what the department said was “financial crisis-era misconduct”.
HSBC said in August that it had reached a settlement in principle worth $765m in relation to its RMBS activities dating back to 2005-07, shortly after the DoJ announced Wells Fargo would pay out $2.09bn.
John Cronin, a financials analyst at stockbroker Goodbody, said: “Many banks have reached multibillion dollar settlement claims with the US DoJ and UBS must be one of the last in line to yet agree a deal.
“It follows a $230m settlement with the State of New York in March 2018 and, while I have some sympathy with UBS’s argument to the effect that it was not historically a significant originator of US RMBS, the New York probe was focused on more than $10bn of RMBS, which is hardly immaterial.”
Cronin added: “UBS’s tough talk is unlikely to be overly constructive from the perspective of reaching a reasonable settlement agreement but, of course, the bank has to defend its position.”
The Guardian has approached the DoJ for comment.
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