RBS sued over US mortgage bonds

| June 21, 2011 | 0 Comments

Royal Bank of Scotland (RBS) is being sued by a division of the US Government for millions of dollars over failed US mortgage bonds - residential mortgage-backed securities (RMBS).

Investors lost hundreds of billions of dollars when these types of investments went sour and resulted in the financial crisis in autumn 2008.

RBS, which is 84% owned by the British taxpayer, is being sued by Kansas-based National Credit Union Administration (NCUA), which regulates credit unions in the US, claiming these faulty mortgage bonds sold by the bank were partially responsible for the collapse of five of the largest credit unions.

A lawsuit was filed yesterday and, according to the NCUA, is the first of many against the largest financial institutions on Wall Street.

It has also filed suit against JPMorgan Chase and is understood to be suing a dozen Wall Street banks.

The NCUA’s lawsuit was filed in a district court in Kansas and the Union’s chairman, Debbie Matz, comments: “NCUA has a responsibility to do everything in our power to seek maximum recoveries from those involved in the issuing, underwriting and sale of the faulty securities that resulted in the failures of five of the largest wholesale credit unions.

Those who caused the problems in the corporate credit union system should pay for the losses.”

RBS declined to comment on the allegations.

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