Credit Suisse to Pay $5.3 Billion to Resolve Mortgage Inquiry

http://www.nytimes.com/2016/12/23/business/dealbook/credit-suisse-mortgage-investigation.html

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LONDON — Credit Suisse said on Friday that it had agreed to pay $5.3 billion to settle an investigation by the United States authorities into the packaging and sale of mortgages ahead of the global financial crisis eight years ago.

The announcement came a day after the Justice Department sued Barclays over the sale of toxic mortgage securities and Deutsche Bank separately said it had reached a tentative $7.2 billion deal to resolve an investigation into its sale of securities backed by residential mortgages.

Credit Suisse said that it would pay a civil penalty of $2.48 billion and provide unspecified relief to American consumers valued at $2.8 billion over five years. The settlement is subject to final negotiations and board approval, the bank said in a news release.

The agreement would resolve claims that Credit Suisse, like many other financial institutions at the time, bundled together unsuitable mortgages into securities that contributed to the 2008 financial crisis when the American housing market collapsed. The industry as a whole has paid tens of billions of dollars to resolve claims over the sale of those securities.

Credit Suisse said the settlement related to business primarily conducted from 2005 to 2007.

Concerns about potentially large civil penalties in the Justice Department’s inquiry have weighed on the stocks of some European lenders.

Deutsche Bank, in particular, had been under pressure in recent months after it said in September that the United States government was seeking up to $14 billion in the inquiry.

Credit Suisse said it would take a pretax charge in the fourth quarter of about $2 billion, in addition to its existing reserves for the mortgage inquiry, to fund the settlement.

The Obama administration has used legislation that stemmed from the savings and loan crisis in the 1980s as a means to pursue cases stemming from the financial crisis.