SandP faces European derivatives case in the Netherlands

6th December 2013, Comments 0 comments

Sixteen European institutional investors are suing rating agency Standard and Poor's, and the Royal Bank of Scotland, for $250 million over losses on so-called toxic financial products during the 2007-08 financial crisis, the plaintiffs said.

"We have created a foundation in the Netherlands and it has filed a claim in the district court in Amsterdam," John Walker, the executive director of the Australian-based Bentham IMF said late on Thursday.

This business is a publicly listed company which funds big legal claims, he told AFP.

A court official in the Dutch capital confirmed the filing, saying "proceedings are underway in this regard."

The investors from Austria, France, Germany and Switzerland want $250 million (183 million euros)in damages over financial products which collapsed during the crisis.

The products, known as collateralised debt obligations or CPDOs, were created in 2006 and given a top AAA credit rating by SandP before their value crashed, Walker said.

Walker previously estimated that CPDO notes worth up to two billion euros were issued in Europe in the three years before the collapse.

They were issued by a branch the Netherlands' third-biggest bank ABN Amro -- which in itself was later taken over by the RBS.

Walker alleged that SandP used a model created by ABN Amro to evaluate the CPDOs.

"What were saying is that Standard & Poor's is guilty of negligence and intentional misconduct by allocating triple-A ratings, the highest, to these products," he told AFP.

"Without the rating, investors would not have bought the product, one of the material causes for the crisis," Walker said.

Betham IMF filed the claim in the Netherlands as ABN Amro was based here and because Dutch procedures were "cheaper and faster" than in Britain, where the RBS was based.

They won a world-first lawsuit against the ratings agency last year on behalf of 13 Australian towns that last U$16.5 million on a the synthetic CPDO derivatives.

It was the first time a ratings agency had stood trial over complex debt derivatives, whose collapse was seen as a major cause of the 2008 global meltdown.

© 2013 AFP

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