UBS Global to Pay $1.4 Billion Fine for Selling Risky Mortgage-Backed Securities
Swiss bank UBS Global has agreed to pay a fine of over $1.4 billion to settle charges brought by U.S. authorities regarding the bank’s sale of risky residential mortgage-backed securities (RMBS) in the lead-up to the 2008 financial crisis. The settlement, which was announced on Monday, involves the payment of $1.435 billion to the Department of Justice (DOJ) to resolve all civil claims related to UBS’s legacy RMBS business in the United States.
The settlement has been described by federal prosecutors as an acknowledgment of UBS’s "fraudulent conduct" that contributed to the 2008 financial crisis. Associate Attorney General Vanita Gupta noted that the crisis had caused widespread financial ruin and emotional devastation, with many individuals still recovering even after nearly 15 years. She emphasized that the DOJ remains committed to holding accountable those who break the law and undermine the well-being of American families.
UBS, along with other financial institutions that profited from the sale of fraudulent residential mortgage-backed securities, is said to have believed themselves to be above the law. U.S. Attorney for the Northern District of Georgia, Ryan Buchanan, remarked that this settlement serves as a warning to other financial institutions of the significant penalties that can result from misrepresenting vital information to investors and eroding trust in public markets.
The settlement with UBS marks the conclusion of litigation brought against more than a dozen financial institutions by the RMBS Working Group since 2012. The Group is a coalition of state and federal investigators from various entities, including the Federal Housing Finance Agency, the Department of Housing and Urban Development, the Securities and Exchange Commission, and the FBI.
Since its establishment, the RMBS Working Group has collected over $36 billion in RMBS-related civil penalties from 18 major domestic and foreign entities. These include Bank of America, Barclays, Citigroup, Credit Suisse, Deutsche Bank, General Electric, Goldman Sachs, HSBC, JPMorgan, Moody’s, Morgan Stanley, Royal Bank of Scotland, S&P, and Wells Fargo.
The 2008 financial crisis was triggered by losses on residential mortgage-backed financial assets, which led to strains in global financial markets. By late 2008, the crisis had worsened, resulting in the U.S. economy entering a recession known as the Great Recession. The financial crisis and subsequent recession are estimated to have cost the country 15% of GDP, or $4.6 trillion, by 2016, with over 6 million Americans losing their homes to foreclosure.
In conclusion, UBS’s agreement to pay a hefty fine for its role in selling risky mortgage-backed securities highlights the ongoing efforts of U.S. authorities to hold financial institutions accountable for their actions during the 2008 financial crisis. The settlement with UBS is part of a broader initiative that has already collected billions in penalties from major domestic and foreign entities. The repercussions of the crisis continue to impact the economy and individuals, underscoring the importance of preventing similar misconduct in the future.
