UBS Fraud Saga Stretching Back to 2008 Ends With $1.43 Billion Fine
Key takeaways
- UBS has been fined $1.43 billion for fraudulently selling subprime mortgages between 2006–7
- It was the last case concerned with the 2008 financial crisis, with penalties now numbering $36 billion
- The banking sector has fresh concerns, namely potential new regulation and downgrades from credit agencies
While nobody was ever charged with criminal activity for the 2008 financial crash, there were a slew of civil court cases — the last of which has just wrapped up. Swiss bank UBS has been fined $1.4 billion for its role in the crisis, resolving a case which has been five years in the making. Here’s what you need to know.
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Why has UBS been fined?
UBS has officially been ordered to pay $1.43 billion to resolve U.S. fraud claims dating all the way back to the 2008 financial crash. Prosecutors had argued the bank had lied to investors about the quality of its sub-prime mortgages, which were at the heart of the global economy crash, in a series of deals dated between 2006–7.
UBS, which didn’t deny or admit the claims, said it had already set aside funds for the ‘legacy’ matter and that all civil claims would be resolved in the U.S. The bank has previously asked for the case to be dismissed, which was first filed in 2018.
The case marks the eighteenth bank to settle for its part in the financial crisis. In total, the penalties have a combined value of $36 billion.
What else is happening with the banks?
It’s been a tricky week for the banking sector, as a second rating agency is in discussions to downgrade the U.S. banking system. Fitch has said it’s looking into whether dozens of banks, including JPMorgan Chase and the Bank of America, need to be downgraded based on the instability seen in March and the debt-ceiling crisis.
Moody’s has already made a similar decision, downgrading ten banks and threatening to review 17 more. In June, Fitch downgraded the U.S. government’s debt rating; it cited political instability as the reason, which was met with fury from the White House.
There’s also talk of stringent regulation on the cards. The chairman of the Federal Deposit Insurance Corporation, Martin Gruenberg said on Monday he wants to introduce “living wills” for regional banks so they can demonstrate how they’d navigate a potential collapse.
The bottom line
The 2008 financial crisis was, obviously, a big deal. It’s no wonder the banks involved have had to pay up for their part in the crash, but we wonder if it needed to take 15 years for that to happen. Still, better late than never — and the banking sector has more recent concerns, like downgrades and stricter regulation, to worry about now.
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