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UBS Will Pay NCUA $69.8 Million

April 2016
UBS Will Pay NCUA $69.8 Million

ALEXANDRIA, Va. (April 15, 2016) – The National Credit Union Administration will receive $69.8 million from UBS in damages and interest for claims arising from losses to Members United and Southwest, two corporate credit unions that failed during the financial crisis, related to purchases of residential mortgage-backed securities.

"Part of NCUA's comprehensive strategy for resolving the corporate crisis has been an aggressive litigation effort to secure recoveries from the Wall Street firms whose sale of faulty securities precipitated the crisis," NCUA Board Chairman Debbie Matz said. "Because of our ongoing efforts to hold responsible parties accountable, we are minimizing net losses to credit unions and should ultimately be able to provide a future rebate to credit unions for their Temporary Corporate Credit Union Stabilization Fund assessments."

As liquidating agent for Members United and Southwest, the NCUA Board initiated litigation against UBS. In February, NCUA accepted UBS's offer of judgment of $33 million in damages. With the addition of prejudgment interest determined by the court, the amount to be paid by UBS increased to $69.8 million. UBS will also be liable for attorneys' fees and expenses in an amount to be determined.

To date, NCUA has obtained more than $3.1 billion in legal recoveries in litigation related to the sale of faulty securities to corporate credit unions. NCUA uses the net proceeds from these settlements to repay the Stabilization Fund's outstanding borrowings from the U.S. Treasury and to decrease the amount that surviving credit unions must pay to recoup the losses of the corporate credit union system.

NCUA still has litigation pending against UBS in federal court in Kansas for sales of faulty residential mortgage-backed securities to U.S. Central and WesCorp corporate credit unions. The agency has additional lawsuits pending against several other firms based on the sale of faulty securities. NCUA also has pending litigation against various residential mortgage-backed securities trustees and LIBOR banks related to corporate credit union losses. NCUA was the first federal depository institutions regulator to recover losses from investments in these securities on behalf of failed financial institutions.

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