UBS SUED BY HSH NORDBANK ON SUBPRIME MORTGAGE SECURITIES

NEW YORK - Swiss investment bank UBS is facing a lawsuit from German bank HSH Nordbank, the largest global provider of shipping finance, over the mis-selling of subprime mortgage securities. The German bank has stated that it intends to sue UBS in New York courts to recoup losses to its $500 million (£254 million) investment fund. The Swiss bank is still recovering from the biggest quarterly loss in banking history and seeing writedowns reach $18.1 billion (£9.2 billion). UBS is also currently considering emergency funding measures from GIC, a Singapore sovereign wealth fund, and an unnamed Middle Eastern investor.

News of the lawsuit has stoked media speculation that there could be a knock-on effect, with more lawsuits filed by angry investors and institutions against the large investment banks that securitised debts from the US subprime mortgage market but have since suffered enormous writedowns on those flawed investments. HSH says it invested $500 million in excess regulatory capital in the fund in question expecting secure returns. It accuses UBS of breaking contractual terms by making high-risk investments and taking out some investments solely for UBS' own benefit.