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(Reuters) — Credit Suisse has agreed to pay $495 million to settle a case related to mortgage-linked investments in the United States, the latest pay-out related to past blunders that have battered the Swiss bank’s reputation.
The lender has been paying out billions of dollars to resolve legal cases linked to its residential mortgage-backed securities business in the run-up to the 2008 financial crisis.
The decline in mortgage payments reduced the value of the assets, leading to huge losses for investors.
Switzerland's second-biggest bank is trying to move on from these legacy issues, which have dogged its performance and cost it billions of dollars.
The bank is also trying to recover from other missteps, including losing more than $5 billion from the collapse of investment firm Archegos last year, when it also had to suspend client funds linked to defunct financier Greensill Capital.
The latest residential mortgage-backed securities case, brought by the New Jersey Attorney General, alleged Credit Suisse had “misled investors and engaged in fraud or deceit in connection with the offer and sale of RMBS.”
The attorney general's office had claimed more than $3 billion in damages in a case filed in 2013.
“Credit Suisse is pleased to have reached an agreement that allows the bank to resolve the only remaining RMBS matter involving claims by a regulator,” the bank said in a statement.
“The settlement, for which Credit Suisse is fully provisioned, marks another important step in the bank’s efforts to pro-actively resolve litigation and legacy issues.”
The New Jersey case was the largest of its remaining exposure on its legacy RMBS business, Credit Suisse said, with five remaining cases at various stages of litigation.
These are expected to be resolved in the next six months, a person familiar with the matter told Reuters. The total cost is likely to be much less than $100 million, the source added.