NCUA Recovers $400 Million from Credit Suisse
ALEXANDRIA, Va. (May 3, 2017) – Legal recoveries by the National Credit Union Administration on behalf of five failed corporate credit unions that purchased residential mortgage-backed securities have reached $5.1 billion, the agency announced today.
NCUA has received $400 million from Credit Suisse for claims arising from losses related to purchases of residential mortgage-backed securities by U.S. Central Federal Credit Union, Southwest Corporate Federal Credit Union, and Western Corporate Federal Credit Union.
“NCUA has pursued litigation for nearly six years with the aim of holding responsible parties accountable and reducing the burden of Stabilization Fund assessments on credit unions,” NCUA Acting Board Chairman J. Mark McWatters said. “As NCUA continues its efforts, we will strive to provide complete, easy-to-access information about the settlements, legal fees, and related costs of litigation. We will also continue to work to control the costs to credit unions of resolving the corporate credit union collapse.”
The Credit Suisse settlement covers claims asserted in 2012 by the NCUA Board as liquidating agent for the three corporate credit unions in federal district court in Kansas. NCUA will dismiss its pending suit against Credit Suisse, which does not admit fault as part of the agreement. In April 2016, NCUA received a judgment of $50.3 million, along with a $9.75 million award for attorney’s fees, in a separate suit against Credit Suisse in federal district court in New York.
NCUA was the first federal financial institutions regulator to recover losses from investments in these securities on behalf of failed financial institutions. As liquidating agent for five failed corporate credit unions—Western, U.S. Central, Southwest, Members United, and Constitution—the NCUA Board filed 26 complaints against 32 defendants in federal courts in New York, Kansas, and California. These include 20 suits over sales of securities NCUA alleged were faulty, two suits alleging violations of law based on manipulation of the London Interbank Offered Rate, and four suits alleging failure to fulfill trustees’ duties with respect to certain residential mortgage-backed securities trusts.
Net proceeds from recoveries are used to pay claims against the five failed corporate credit unions, including those of the Temporary Corporate Credit Union Stabilization Fund.
NCUA makes detailed information on its legal recoveries in cases related to the failure of the five corporate credit unions available online. The breakdown of the net recoveries posted on the webpage will be updated when information calculation and processing of fees and expenses are completed.