UBS, the Swiss banking behemoth, has reached an agreement to pay a substantial $1.4 billion as part of a settlement to address allegations of investor fraud connected to the sale of mortgage-backed securities during the critical 2008 financial crisis. The announcement was formally made by the US Department of Justice on Monday.
This settlement marks the resolution of the final ongoing case pursued by federal prosecutors against major banks stemming from the aftermath of the financial crisis. The endeavor has collectively yielded an impressive $36 billion in settlements from nearly 20 financial institutions, as highlighted in an official press release from the Department of Justice.
In 2018, the Department of Justice launched a civil case against UBS, asserting that the bank had knowingly presented false and deceptive information related to the sale of 40 residential mortgage-backed securities (RMBS) released in 2006 and 2007. The core argument was that UBS was fully aware that a significant portion of the loans supporting the RMBS did not adhere to the established loan underwriting guidelines designed to evaluate borrowers' repayment capacity.
The aftermath of this alleged misrepresentation resulted in considerable losses for the 40 RMBS in question, a point strongly emphasized by the Department of Justice.
Breon Peace, US Attorney for the Eastern District of New York, emphasized the significance of the resolution, stating, "This settlement makes UBS answer for its role in underwriting and issuing residential mortgage-backed securities." He further cautioned that the substantial financial penalty should serve as a stern warning to other financial market participants, discouraging any illicit profiteering through fraudulent practices.
UBS has labeled the case a "legacy matter" and indicated that the necessary funds for the settlement had been provisioned in prior periods.
