Credit Suisse Ordered to Pay NCUA $21.3 Million in Interest

ALEXANDRIA, Va. — Three weeks after the National Credit Union Administration accepted a preliminary, $29 million offer of judgment from Credit Suisse to resolve claims arising from losses related to purchases of residential mortgage-backed securities, a court determined prejudgment interest to be $21.3 million, pushing the total the Swiss banking giant owes the regulator to $50.3 million — so far.

The case in question involves RMBS purchased by Members United and Southwest Corporate Credit Unions. The NCUA board initiated litigation as liquidating agent for the failed corporate credit unions.

On March 24, NCUA announced it had accepted an offer of judgment from Credit Suisse that included $29 million in damages, plus prejudgment interest in an amount to be determined by the court. Credit Suisse still is liable for attorneys' fees and expenses in an amount to be determined by agreement between the parties or by the court.

In addition, NCUA has litigation pending in federal court in Kansas against Credit Suisse for sales of faulty residential mortgage-backed securities to U.S. Central and Southwest Corporate Credit Unions. It also has lawsuits pending against several other firms based on the sale of faulty securities. NCUA likewise has pending litigation against various RMBS trustees and LIBOR banks related to corporate credit union losses.

NCUA noted it was the first federal financial institutions regulator to recover losses from investments in these securities on behalf of failed financial institutions. Earlier this week, when NCUA revealed its share of a multi-party settlement with Goldman Sachs totaled $575 million, the regulator said it had obtained more than $3 billion in legal recoveries in securities cases.

Net proceeds are used to pay claims against five failed corporate credit unions, including those of the Temporary Corporate Credit Union Stabilization Fund. NCUA said recoveries by the Stabilization Fund reduce the likelihood of assessments charged to federally insured credit unions to pay for the losses caused by corporate credit union failures.

In late February, NCUA accepted a judgment for $33 million, plus pre-judgment interest, from another Swiss banking giant, UBS AG.

"NCUA's litigation efforts fulfill its statutory obligation to secure recoveries for credit unions and help protect consumers," Debbie Matz, NCUA's board chairman, said in a statement Thursday. "These efforts will continue. We will aggressively pursue recoveries against the Wall Street firms that contributed to the corporate crisis and work to minimize net losses and provide a future rebate to credit unions."