Hanspeter Brunner, a Swiss national, claimed that the bank breached its bonus agreements and separation pact with him without any legal basis.
A Singapore-based lawyer for BSI told Bloomberg that Brunner “has withdrawn his claim against the bank in its entirety”.
“The bank is pleased that good sense has prevailed and is happy with the outcome,” Muralli Rajaram said.
Brunner’s lawyer declined to comment and details of the settlement were not disclosed.
Mutually agreed retirement
BSI and Brunner “mutually agreed” in September 2015 that he would retire, court papers said. A separation agreement was reached in March, which included deferred bonus payments for 2012 to 2014.
Brunner’s retirement was then announced.
On 24 June, BSI reportedly wrote to Brunner saying that it intended to freeze a payment of S$722,800 (£412,962, $538,082, €477,273).
Brunner accused the bank of intending to “renege on all of its other payments obligations” totalling S1m, scheduled to be paid through June 2018.
In July, he served a lawsuit against his former employer.
Brunner was one of six BSI bankers referred to prosecutors by the Monetary Authority of Singapore (Mas) over lapses in dealing with scandal-ridden Malaysian state development fund 1MDB.
In the first such move since 1984, Mas ordered that BSI Bank be shut down in May 2016, in what it described as "the worst case of control lapses and gross misconduct".
The bank was also fined it S$13.3m for 41 breaches relating to the prevention of money laundering and countering the financing of terrorism.