Germany’s HSH Nordbank is looking to recover what it calls significant losses on a $500m (£253m) portfolio it bought in 2002.
Nordbank alleges that UBS did not manage the assets in line with Nordbank’s prudent investment objectives.
Record default rates on US sub-prime mortgages have caused pro-blems for many banking insti- tutions around the world.
US banks repackaged their debts into products known as collateralised debt obligations which were then sold on to other banks.
If Nordbank is successful in recovering its money there could be a wave of similar legal actions from other banks and investors who claim not to have been made aware of how risky CDOs were. It plans to file its suit in New York by the end of the month.
UBS declined to comment.