UBS warned that U.S. prosecutors are preparing to levy civil charges over crisis-era mortgage instruments. Unlike rivals, the Swiss bank isn't shying away from the showdown.
The U.S. Department of Justice, or DOJ, plans to lodge civil charges against UBS, the Zurich-based bank said in a statement overnight. American prosecutors aim to pursue UBS for mortgage securities it sold in the run-up to the financial crisis of 2008-09, and which are believed to have contributed to it.
«The DOJ’s claims are not supported by the facts or the law. UBS will contest any such complaint vigorously in the interest of its shareholders,» the bank said. «UBS is confident in its legal position and has been fully prepared for some time to defend itself in court.»
French Trial
The charges represent another relic from the past which is popping up to haunt UBS, which currently has its hands full fighting tax and money-laundering criminal charges in a high-stakes trial in France. It is also fighting a suspension from sponsoring initial public offerings in Hong Kong.
A swath of rivals to UBS including Goldman Sachs, J.P. Morgan, Barclays, and Credit Suisse have acceded to U.S. prosecutors and paid heavy fines for their practices of crisis-era residential mortgage-backed securities, or RMBS.
Issuer vs Seller
UBS argues that is was not a significant issuer of U.S. housing mortgages – as its rivals were – and itself suffered under massive losses in subprime and other securities related to the U.S. housing market during the crisis.
«This fact alone negates any inference that UBS engaged in an intentional fraud,» the bank said. It did, however, sell the mortgage-backed investments to investors, which is apparently where U.S. prosecutors want to attack.
