UBS confronts lawsuits, potential fines

Bloomberg

UBS Group AG’s two biggest legal cases in years are entering the final stretch in a test of Chief Executive Officer Sergio Ermotti’s strategy of taking on French and US authorities.
The Swiss bank was hit with a long-expected US fraud lawsuit that accused it of fuelling the 2008 financial crisis by deceiving investors who bought billions of dollars of risky mortgage-backed securities. In France, the state and prosecutors are seeking as much as 5.3 billion euros ($6 billion) in fines and damages over allegations it helped clients hide money from authorities. That would be easily the largest criminal penalty ever levied in the nation.
UBS’s hard bargaining has resulted in both cases going to court, often a last resort for banks, with the worst-case scenario being huge fines and lengthy legal battles. The cases are among a series of such obstacles UBS has faced since the start of the financial crisis, including a $1.5 billion fine in 2012 for rigging the Libor benchmark. UBS declined as much as 4.6 percent in Zurich trading and was down 2.7 percent at 14.12 francs at the close.

FIGHTING CASES
“The French are demanding a lot — probably 10 times more than what I estimate UBS has provisioned,” Daniel Regli, an analyst at MainFirst in Zurich, said by phone. “At a maximum, half of that amount would be realistic.”
The Swiss bank “has gone the route of fighting cases, most have come to agreements with authorities,” Regli said. “Time will tell if this more aggressive approach works out.”
It’s an approach that worked for Barclays Plc. It fought back against the DOJ in a similar case two years ago, when negotiations broke down over the size of the penalty involved. Federal prosecutors in Brooklyn filed a civil complaint against the bank, but settled the case earlier
this year for $2 billion, less than half what US authorities had originally demanded.
The UBS case in France ended up in court after settlement talks collapsed in March 2017 over how much it should pay. UBS had been pushing to settle the investigation for less than the 300 million euros it paid to resolve a similar case in Germany. That’s also the amount HSBC Holdings Plc agreed to settle a similar criminal investigation by the French government last year, the second-biggest corporate charge levied in the nation.
UBS and its units securitised more than $41 billion of mortgage loans in deals that proved to be “catastrophic failures,” US Attorney Richard Donoghue in Brooklyn, New York, said in a statement.