German bank HSH Nordbank will sue Swiss UBS to recover "significant" losses on a $500 million portfolio of collateralized debt obligations (CDOs) linked to the U.S. mortgage market, the bank said in a statement on Monday.
UBS sold the investments, known as North Street 2002-04, in 2002 to Landesbank Schleswig-Holstein, which later merged with Hamburgische Landesbank to become HSH Nordbank.
"Our investment in the North Street program was to be conservatively managed by UBS according to prudent investment objectives," HSH Nordbank said in the statement.
"We came to the realization that the world’s largest asset manager, UBS, appears to have condoned actions which benefited only itself, at the expense of its clients," it added.
Contacted by CNBC Europe, UBS refused to comment.
HSH Nordbank expects to file the suit in the state of New York by the end of February, and will accuse UBS that its management of the portfolio has been in breach of its contractual obligations.
UBS shares closed higher by 2.5 percent, slightly higher than the SMI.