Two investment banking houses have agreed to pay nearly $0.2 billion to settle losses allegedly suffered from investments in mortgage securities by failed corporate credit unions.
A settlement announced Monday by the National Credit Union Administration has Deutsche Bank Securities paying $145 million.
The settlement resolves losses suffered by five failed wholesale credit unions as a result of investments in residential mortgage-backed securities. Wholesale credit unions, which are also known as corporate credit unions, provide services for retail credit unions but don’t serve consumers.
The five institutions that failed were U.S. Central, Western Corporate Federal Credit Union, Southwest Corporate, Members United Corporate and Constitution Corporate.
Also agreeing to a settlement was Citigroup Inc., which will pay $20.5 million, according to a separate press release.
Neither Citi nor Deutsche admitted to any wrongdoing.
Deutsche and Citi were “among the first major underwriters to come forward with a settlement proposal, and we appreciate [their] efforts to resolve potential claims so that we can avoid the expense and delay of litigation,” NCUA Chairman Debbie Matz said in the statements.
Losses from the failure of the corporate credit unions are paid from the Temporary Corporate Credit Union Stabilization Fund, which is funded by assessments to federally insured credit unions. Since 2009, $3.3 billion has been assessed.
While the settlements will reduce the assessments that credit unions will have to pay, there is still between $1.8 billion and $6.1 billion that will need to be assessed by 2021.
Matz explained in the news release that the regulator has raised more than $28.3 billion by resecuritizing troubled assets from the failed institutions.
In addition, the NCUA is still fighting four other Wall Street firms in court. Lawsuits against two of those firms, J.P. Morgan Securities LLC and RBS Securities Inc., were filed in U.S. District Court for the District of Kansas earlier this year.
