Swiss banking giant Credit Suisse Group AG must pay $2.48 billion to US authorities in settlement of the case linked to the wrongful sale of Mortgage Backed Securities (MBS) which led to one of the worst economic crisis ever witnessed. The bank will also compensate affected customers by paying $2.8 billion over a period of five years since this settlement. The bank said in its statement that the deal could be changed depending upon the final negotiations of the board of directors. The statement made by the bank also said: “Credit Suisse will take a pre-tax charge of approximately $2 billion in addition to its existing reserves against these matters. This will be taken in our 4Q 2016 financial results.”
The news of Credit Suisse’s settlement came after the news of Deutsche Bank’s agreement with the Department of Justice for $7.2 billion; this amount was a significant achievement for the German banking giant as it was handed over a bill of $14 billion in September for the settlement of this case.
The deal shows the effort put in by the Justice Department to hold European banks accountable for the deals they made which resulted in the crises of 2008. The crisis caused by the collapse of the US housing market was triggered by securities having sub-prime mortgages as their underlying security. Barclays was also sued by the DOJ over the same issue last Thursday.
Credit Suisse also paid a $2.8 billion fine earlier in 2014 for assisting wealthy Americans clients to escape taxes. The bank announced in November that it had raised its litigation provisions by $348.29 million mainly to make up for the mortgage-related settlement.
Jeffrey Newman represents whistleblowers