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<\/a><\/p>\nBy Sam Tobin<\/p>\n
LONDON (Reuters) – Credit Suisse was accused on Thursday of having “learnt nothing” from the 2008 financial crisis on the first day of a trial at London’s High Court over residential mortgage-backed securities.<\/p>\n
Loreley Financing, a special purpose vehicle set up by German bank IKB, is suing Credit Suisse over its 2007 purchase of $100 million of notes as part of a collateralised debt obligation transaction.<\/p>\n
The Jersey-registered company said in court filings that it bought the notes because of Credit Suisse’s “false and dishonest representations” about their value.<\/p>\n
Loreley also argues the allegedly false representations were part of a “systemic fraud” by the Swiss bank in relation to the securitisation of residential mortgage-backed securities (RMBS).<\/p>\n
Credit Suisse denies that there was any fraud in relation to its RMBS business, saying in written arguments that Loreley’s case is “thoroughly implausible”.<\/p>\n
Loreley’s lawsuit, which was filed in 2018, long pre-dates Credit Suisse’s takeover by its rival UBS last month.<\/p>\n
But the case underlines the legacy issues facing UBS in taking on Credit Suisse \u2013 which has suffered from high-profile risk management failures and a string of losses in recent years.<\/p>\n
Opening the case on Thursday, Loreley’s lawyer Tim Lord repeatedly referred to Credit Suisse’s $5.28 billion settlement with the U.S. Department of Justice, which was agreed in 2016 to settle claims it misled RMBS investors.<\/p>\n
Lord said Credit Suisse’s defence to the lawsuit suggests the bank considers its conduct as set out in a statement of facts agreed with the DOJ was “acceptable banking practice”.<\/p>\n
However, Credit Suisse argued in court filings that the settlement with the DOJ “makes no reference to dishonesty, fraud, knowing misrepresentation or anything of that kind”.<\/p>\n
Its lawyer Patrick Goodall added that, if Loreley is correct, “then it is not merely Credit Suisse which was running a wholly dishonest business \u2013 many of the allegations made against Credit Suisse were matters which were replicated across the entire industry”.<\/p>\n
\n(Reporting by Sam Tobin; Editing by Alexandra Hudson)<\/p>\n
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