Credit Suisse agrees to pay US$5.3b in US mortgage accord

[ZURICH] Credit Suisse Group AG agreed to pay US$5.28 billion to resolve a US investigation into its business in mortgage-backed securities as officials work through a backlog of crisis-era bank cases.

The Swiss lender will pay a US$2.48 billion civil penalty and US$2.8 billion in relief for homeowners and communities hit by the collapse in home prices, according to bank statement on Friday. Credit Suisse will take a pre-tax charge of about US$2 billion in addition to its existing reserves during the fourth quarter.

The announcement follows Deutsche Bank AG which said it also agreed to settle early on Friday. In a related case, the Justice Department sued Barclays Plc for fraud over its sale of mortgage bonds after the bank balked at paying the amount the government sought in negotiations.

The lawsuit announced on Thursday is rare for big banks, which typically settle with the government rather than risk drawn-out litigation and a possible trial.

The Obama administration is pressing to wrap up investigations of Wall Street firms for creating and selling the subprime mortgage bonds that fueled the 2008 financial crisis. Authorities have already extracted more than US$46 billion in fines from six US financial institutions over their dealings in mortgage-backed securities.

Bank of America Corp, which had the largest such settlement, agreed to pay US$16.7 billion over bonds that were worth four times those of Deutsche Bank.

BLOOMBERG