UBS To Make A $1.44 Billion Worth Of Penalties Over Fraudulent Claims

UBS, the largest banking institution in Switzerland, has agreed to pay $1.44 billion in penalties. The penalties will go towards settling fraud claims as the Swiss bank is accused of misleading investors in the United States through residential mortgage-backed securities (RMBS).

UBS to pay $1.44 billion in penalties over fraud claims

The fraud claims were filed by the US Department of Justice (DOJ), which said that the lending giant sold the securities shortly before the 2008 financial crisis. The agency also complained, alleging that UBS had defrauded investors with the sale of 40 RMBS issued in 2006 and 2007.

The DOJ said that UBS knowingly made false and misleading statements on the characteristics of the loans underlying the securities offered. It said the lender was aware of the present issues as it had conducted due diligence on these loans.

“UBS was allegedly aware of these significant problems because it had conducted extensive due diligence on the underlying loans prior to the RMBS being issued to determine whether the loans were consistent with representations that would be made to investors,” the DOJ said.

The DOJ also said that the settlement would resolve the last case presented by the working groups focused on investigating the activities of banking institutions and other players in the financial industry.

The department secured settlement deals over similar fraud claims against leading banks such as Barclays, Merrill Lynch, Nomura Holdings, and the Royal Bank of Scotland (RBS). The new settlement will see UBS, banks, loan originators, and rating firms under DOJ’s investigation being paid more than $36 billion in penalties.

UBS fails to admit to allegations

The DoJ also said that the claims resolved through this settlement with UBS were only allegations, as the lender had not admitted any wrongdoings. UBS is currently the largest lender in Switzerland after the Swiss government brokered a deal to acquire Credit Suisse, which was closed in June.

UBS confirmed the settlement in a statement saying it had “fully provisioned” it in previous periods. The US Attorney for the Eastern District of New York, Breon Peace, noted that the civil penalty would ensure safety across the financial markets.

The Swiss lender also noted that the civil penalty would warn the other participants in the financial markets who want to secure unlawful profits by engaging in fraudulent activities. Despite how long it took, the agency noted that these bad players would be held accountable.

Peace confirmed that more than $36 billion had been collected over charges around the conduct that triggered the 2008 financial crisis. He noted that the settlement showed that the Department of Justice was deeply committed to protecting the financial markets, investors, and the public against fraudulent activities.