Credit Suisse’s $511 Million DOJ Settlement: A Turning Point for UBS?

The U.S. Department of Justice (DOJ) has reached a landmark agreement with Credit Suisse, now a subsidiary of UBS Group AG, to resolve a long-standing tax evasion case. Under the terms finalized in May 2025, Credit Suisse agreed to pay $511 million to settle allegations of violating a 2014 plea deal by failing to disclose information about undeclared American-held accounts. This settlement marks a critical step in addressing legacy liabilities inherited by UBS after its 2023 acquisition of Credit Suisse, but lingering obligations from prior misconduct continue to cloud the bank’s outlook.

The Tax Case: A Decade in the Making

The DOJ’s investigation targeted Credit Suisse’s conduct under its 2014 guilty plea for conspiring to help U.S. taxpayers evade taxes. At the time, the bank agreed to pay a $2.6 billion penalty and terminate relationships with clients holding undeclared accounts. However, authorities alleged that Credit Suisse failed to fully comply by not disclosing where funds moved after such accounts were closed, enabling clients to hide assets elsewhere. The May 2025 settlement resolves these claims, with Credit Suisse pleading guilty to conspiracy to aid in false tax returns.

UBS’s Role: Inheriting Legacy Liabilities

UBS acquired Credit Suisse in March 2023 amid its collapse, inheriting not only its assets but also its legal liabilities. The $511 million penalty will impact UBS’s second-quarter 2025 financial results, with the bank reporting a charge for the settlement and a corresponding credit from the release of $4 billion in legal provisions set aside for unresolved Credit Suisse cases.

While the settlement brings closure to this specific case, UBS faces ongoing challenges tied to Credit Suisse’s past actions. The most significant unresolved obligation stems from the 2017 Residential Mortgage-Backed Securities (RMBS) settlement, which required Credit Suisse to provide $2.8 billion in consumer relief (e.g., loan modifications, affordable housing) by December 2021. Credit Suisse missed this deadline and now projects completion by 2026 at the earliest, with penalties compounding at a 5% annual rate for delays. As of late 2021, only $372 million of the obligation had been fulfilled, leaving a lingering financial overhang.

Investor Implications: Risks and Reputational Costs

The $511 million settlement is a material hit for UBS, but it is dwarfed by the broader RMBS liability. The Monitor overseeing the RMBS agreement, Neil Barofsky, has reported minimal progress in fulfilling consumer relief goals, with only 13% of loan principal forgiveness obligations met. This raises concerns about UBS’s ability to absorb further penalties or delays, especially if the DOJ accelerates enforcement under a new administration.

Additionally, UBS’s post-merger integration has drawn scrutiny. Switzerland’s financial regulator, FINMA, required UBS to revise its crisis management plans due to integration complexities, highlighting operational risks. Meanwhile, UBS’s litigation provisions in its Private Wealth Management division stood at $1.271 billion as of December 2024—a figure that may not fully account for all inherited liabilities.

Conclusion: A Mixed Outcome for UBS

The $511 million DOJ settlement represents a milestone in resolving Credit Suisse’s historical misconduct, offering UBS some clarity. However, the bank remains burdened by the RMBS obligations and other unresolved cases, such as a $418 million damages ruling in a Singapore-based client dispute. With $2.43 billion remaining on the RMBS consumer relief commitment (including penalties), UBS must navigate these challenges while maintaining investor confidence.

For investors, the settlement underscores the prolonged legal and financial risks of acquiring distressed institutions. While UBS’s stock has rebounded since the 2023 crisis (), the path forward requires not only resolving legacy cases but also rebuilding trust. Until UBS demonstrates progress on its RMBS obligations and operational integration, skepticism may linger—a cautionary tale for banks eyeing similar acquisitions.

In the end, the $511 million settlement is a step forward, but UBS’s true test lies in managing the unresolved liabilities that continue to shadow its future.