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Credit Suisse's damages in securities misselling cases could total $1.4B

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Credit Suisse's damages in securities misselling cases could total $1.4B

Credit Suisse Group AG's potential damages in fighting residential mortgage-backed securities cases could surpass the $681 million reserve the bank set aside at the end of 2018 and may total approximately $1.4 billion, the Financial Times reported Oct. 7, citing regulatory filings by the bank.

The bank faces numerous lawsuits relating to alleged misselling of residential mortgage-backed securities in 2006 and 2007. One case, whereby claimants are seeking $730 million in damages, is slated to go to trial in January 2020 at the New York Supreme Court in Manhattan. The amount originally claimed in that case has been accruing 9% annual interest since the filing of the suit, the FT said.

The bank lost to plaintiffs at an appellate court in September, while the verdict in another case that went to trial in July in Manhattan is pending.

A Credit Suisse spokeswoman said the bank denies allegations of defrauding any investors in selling the securities.

There are at least 12 open RMBS lawsuits brought by Credit Suisse's challengers, who allege that the Swiss lender misrepresented the quality of bonds underlying RMBS when it sold them in 2006 and 2007. The structured finance products played a central role in the 2008 financial crisis.

At the end of 2016, Credit Suisse agreed to pay the U.S. Department of Justice $5.3 billion to settle RMBS misselling allegations, and at the end of 2017 it settled another lawsuit with New York state related to legacy RMBS business conducted through 2007.