With New Evidence via WikiLeaks, RBS Awaits Subprime Lawsuit

(December 20, 2010) – A major Dutch asset manager and pension investment provider is preparing to sue the Royal Bank of Scotland (RBS) over subprime mortgage-related losses.

According to various news outlets, Mn Services purchased shares in RBS between 2007 and 2009 – only to see their value plummet after the bank’s acquisition of ABN Amro and its holdings it American subprime mortgage-backed securities evaporated. While Mn’s attempt to gain class action status for the lawsuit failed in the United States, the asset manager will bring the case forward in the United Kingdom. According to Mn head of responsible investing Kris Douma, upwards of 20 other European institutional investors will join the suit, according to Scotland’s Herald.

The announcement of the pending lawsuit coincides with revelations from a WikiLeaks document dump relating to the fall of RBS and its ultimate government bailout. In what is the latest in a string of embarrassing American diplomatic cables leaked by the whistle-blower website, the bank’s new chairman, Sir Philip Hampton, is quoted as saying that former bank directors may have breached their fiduciary responsibilities, according to The Guardian, one of the major media outlets who received the documents. The fiduciary breach, according to the cables, relates to the bank’s acquisition of ABN Amro and its subprime exposure.

“Top among them was its heavy exposure in the US subprime market and the bank’s purchase of ABN Amro, which occurred at the height of the market and without RBS doing proper due diligence prior to the purchase,” the communications stated. “The board of directors never questioned this purchase, which Hampton termed a failure of their fiduciary responsibilities.” 

Also embarrassing is that the release of the cables comes only a week after RBS was cleared by the United Kingdom’s financial regulator of wrongdoing. According to the Financial Services Authority (FSA), former chairman Sir Fred Goodwin and other directors made a “series of bad decisions” but were not guilty of “a lack of integrity”.