UBS eyes new legal battle in US over subprime crisis

Swiss banking giant UBS said on Thursday that it was bracing for another legal battle in the US over sales of mortgage-backed securities in the run-up to the financial crisis a decade ago.

UBS eyes new legal battle in US over subprime crisis
UBS on insisted on Thursday that it was not a major player in US residential mortgages at the time the housing market crumbled.. Photo: AFP

The bank said in a statement it had been advised that the US Department of Justice “intends to file a civil complaint as early as November 8, 2018.”

“UBS anticipates that the complaint will seek unspecified monetary civil penalties” over transactions that date back to 2006 and 2007, it said in a statement.

Read also: France wants UBS fined €1.6 billion for tax fraud – lawyer

The bank insisted on Thursday that the new US authorities' claims against it were “not supported by the facts or the law”, and said it would contest any complaint “vigorously”.

“UBS is confident in its legal position and has been fully prepared for some time to defend itself in court,” it said.

Subprime mortgages — which are risky but classified as safe investments by credit ratings agencies — were at the heart of the 2007-2008 financial crisis that devastated communities around the world and brought a number of banking giants to their knees.

US authorities have opened a number of cases against banks they accuse of intentionally converting “toxic” mortgages into seemingly safe financial products in the years leading up to the crisis.

A number of banks have been slapped with heavy penalties, including UBS's compatriot Credit Suisse, which last year settled its case for a whopping $5.28 billion.

UBS insisted on Thursday that it was not a major player in US residential mortgages at the time the housing market crumbled.

“This fact alone negates any inference that UBS engaged in an intentional fraud,” it said.

Earlier this year, UBS was among several large banks to settle a case over sales of subprime mortgages with the New York Attorney General, with the Swiss bank agreeing to dish out $230 million in that case.

For members


Reader question: Can a foreign national obtain a loan in Switzerland and under what conditions?

When it comes to borrowing money from a Swiss bank, nationality may play a role in some cases, but not in others. This is what you should know about this process.

Reader question: Can a foreign national obtain a loan in Switzerland and under what conditions?
Getting a losn in Switzerland is subject to many conditions. Photo by Claudio Schwarz/Unsplash

Like almost everything in Switzerland, consumer loans are regulated by legislation, in this case the Consumer Credit Act.

It defines a loan as between 550 and 80,000 francs, “offered by commercial providers of financial services”. Lower or higher amounts are not subject to the Consumer Credit Act.

As is the case in many other countries, Swiss banks have strict criteria about who they lend money to. After all, no financial institution wants to deal with people who are not creditworthy.

Whether or not a foreign national can borrow money from a bank depends on their permanent place of residence and permit status.

As a rule, Swiss lenders don’t give loans to non-residents. So if you reside abroad, there is practically no chance that a bank in Switzerland will lend you money.

However, some financial institutions make exceptions for cross-border workers. If you fall under this category, you can use this interactive tool, select “ Permit G” under “Residence Permit” and see what, if any, options, there are.

READ MORE: EXPLAINED: What cross-border workers should know about taxation in Switzerland

If you are a foreign national but have a permanent residence status (Permit C), your chances of getting a loan are practically the same as those of Swiss citizens — provided, of course, that you meet all the requirements set by lenders (see below).

What about other permit holders?

If you have a B Permit, you might be approved for a loan, depending on how long you have had this permit — obviously, the longer the better.

However, “you may be offered a higher interest rate or a limited loan amount. This is because of the statistically higher probability that you will return to your home country. Some lenders require the loan to be repaid by the time the B permit expires”, according to consumer comparison site 

Holders of other, temporary or conditional permits are not accepted.

READ MORE: ‘A feeling of belonging’: What it’s like to become Swiss

What conditions — other than residence permit — should you fill to be considered for a loan?

You must be at least 18 years of age, though additional restrictions may apply to applicants under 25 — for instance, a higher interest rate or a limited loan amount. That’s because “lenders are generally more cautious with young applicants as their financial circumstances are usually less settled and the risk of default is deemed to be higher,” Comparis noted.

The same cautious approach applies to pensioners, especially those who have no regular income. The social security payments (AHV/AVS) do not count as income for the purpose of the loan.

There is also other eligibility criteria, based on employment status and salary. People with a regular income have a higher chance of obtaining a loan than those who are self-employed, temporarily employed, work on hourly basis or, logically, unemployed.

Other factors, including your existing debts, are also taken into account in the decision process.

Basically, lenders favour applicants with a stable income and good financial standing, in much the same way as supplemental health insurance carriers prefer young and healthy people.

Keep in mind that if your loan application is rejected, this will be recorded in the database of the  Central Office for Credit Information, making it more difficult, though not impossible, to get a loan in the future.

The same rules do not apply to American citizens

That’s because Swiss and European banks are subjected to US demands to disclose the assets of Americans overseas in order to prevent tax evasion.

As adherence to these requirements is a major headache for the banks and in some cases also violates their country’s privacy laws, financial institutions prefer not to deal with Americans at all, even those who are permanent residents.

If you are a US citizen who also has Swiss nationality, you may have an easier time of it, but could still face hurdles in obtaining loans and other banking services.

There is no immediate relief in sight, although many organisations representing Americans abroad are lobbying in Washington to change the existing legislation.