A settlement has been reached in one of the more peculiar lawsuits stemming from the financial crisis of 2008. Italy’s picturesque Lombardy region has been embroiled in lawsuits with banking giants Bank of America (NYSE: BAC) and UBS (NYSE: UBS), over derivatives linked to $1 billion of bonds issued years ago.

Today’s settlement comes weeks before a judge in Milan rules on whether four banks, including UBS, should be convicted of fraud over a separate sale of derivatives to the city. Terms of the settlement weren’t disclosed in a joint statement from the northern Italian region and the banks today. The agreement came after the lenders sued Lombardy in a London court to uphold the swap they arranged in 2002 that allowed the municipality to repay a bond in instalments rather than with a one-time repayment when it matures in 2032.

The banks set up a fund to invest the city’s repayments until the debt matured. Lombardy last year set aside 153 million euros ($199 million) for potential losses on Greek bonds the fund purchased and alleged the banks committed fraud by hiding their fees.

The agreement with Bank of America allows for “improving the swap’s management and continuing the collaboration,” the local government said in today’s statement. The separate accord with Zurich-based UBS ends the dispute, the region said without elaborating. Officials at UBS and Lombardy declined to comment on the terms of the agreement. A probe by Milan’s prosecutor found UBS and Merrill Lynch hid 95 million euros in fees when they sold the region of Lombardy derivatives. The prosecutor ended the probe in 2010 because it would have breached the statute of limitations.

The European debt crisis continues to drag on local markets, and while premiums have levelled off from their summer highs, investors remain cautious given the slow pace of reform underway in Europe. While Mario Draghi has largely appeased external concerns that the Euro would soon collapse and Greece would be thrust into even greater turmoil, he has not yet been able to rectify some of the core issues that have put Europe in this situation in the first place, out of control government spending and massive tax evasion. The issue with Bank of America and UBS has now come to a close, but the rebound for Italy and it’s European partners in issuing debt won’t likely come for much longer, as investors are cautiously approaching sovereign debt once thought to be low risk.