German bank says it will sue UBS over US sub-prime losses

German bank says it will sue UBS over US sub-prime losses
Posted: 25 February 2008 2247 hrs

FRANKFURT : The German bank HSH Nordbank plans to sue Swiss giant UBS in the United States for alleged mismanagement of funds which were invested in securities connected to the US sub-prime mortgage market, HSH said.

The German bank "expects to file its claim against UBS in the State of New York by the end of February," a statement said.

HSH took exception to investment of 300 million euros (444 million dollars) in collateralised debt bonds which had been structured and managed by UBS.

CDOs are a type of asset-backed security comprising a portfolio of fixed-income assets, and are often backed in part by home loans, which in the case of the US sub-prime market, suffered from widespread defaults last year.

In its statement, HSH Nordbank said it would argue "that UBS's management of the portfolio has been in breach of its contractual obligations and fiduciary duties and that substitutions were made solely for the benefit of UBS."

The German bank, formed from a merger of two northern regional German banks, said it would demand "the recovery of its losses which we regard as the responsibility of UBS."

A UBS spokesman contacted by Thomson Financial News said only: "We do not comment on legal cases."

The Swiss banking giant plunged to its first-ever full-year net loss last year after losing 18 billion dollars in the US sub-prime mortgage crisis.

UBS revealed a net loss of 4.4 billion Swiss francs (4.0 billion dollars, 2.7 billion euros) in 2007, compared to a profit of 12.3 billion Swiss francs in 2006. - AFP/de