CIBC to pay $125 million to settle class-action lawsuit in wake of financial crisis

CIBC to pay $125M in suit

CIBC has agreed to pay $125 million to settle a class-action lawsuit that had accused the bank of misrepresenting its exposure to U.S. residential mortgage-backed securities ahead of the financial crisis.

Investors launched the suit in 2008 alleging that the bank not only misled the market on the size of its exposure to the U.S. subprime market, but also to the volatility of the related investments.

CIBC spokeswoman Nima Ranawana said in a statement that the bank reached a settled without any admission of liability or wrongdoing, and that the plaintiffs' claims remain unproven.

"While we believe CIBC’s disclosure was appropriate and met all applicable requirements, we have reached an agreement to avoid further legal costs and put the matter behind us."

The bank lost an appeal at the Supreme Court of Canada in 2015, allowing the class-action to go to trial.

The lawsuit sought to recover close to $4 billion in damages as part of its allegation that the bank did not properly disclose $11.5 billion in exposure to the subprime market.

The subprime market involved mortgage-backed securities that offered attractive rates of return due to higher interest on the mortgages, but the lower credit quality eventually produced massive defaults.

The meltdown of the U.S. residential mortgage-backed securities market was a key factor in the financial crisis.

Under the settlement, investors who bought shares of CIBC between May 31, 2007, and Feb. 28, 2008, may be entitled to a payment.

The agreement must still be approved by the Ontario Superior Court of Justice. A hearing has been set for Jan. 12.

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