UAE bank settles legal case with rating agencies

  • Share via facebook
  • Tweet this
  • Bookmark and Share

Abu Dhabi Commercial Bank (ADCB) has settled its legal battle with ratings agencies Moody's and Standard & Poor's over the safety of debt vehicles marketed by Morgan Stanley, it has been confirmed.

The lender said it had “successfully settled its legal action against Morgan Stanley, S&P, Moody's and others in respect of its purchase of Cheyne SIV notes.”

The legal battle began in 2008 in a New York district court, with investors, including ADCB, claiming the rating agencies had mislead them about the riskiness of the financial products in a bid to protect future business interests.

“The action was resolved on Wednesday 24th April, 2013 by an out-of-court settlement, the terms of which are confidential,” the statement added. The original case was seeking damages of up to $700m.

“ADCB is satisfied with the outcome of the settlement. The original investment had already been fully provisioned and receipt of the settlement proceeds will have a positive but relatively limited impact on ADCB's balance sheet.”

The credit rating agencies have been accused by investors, regulators and politicians of inflating the ratings of risky mortgage-backed and structured securities during the financial crisis.

In the ADCB case, investors accused rating agencies of collaborating with banks to ensure that ratings were high, even though much of the underlying collateral was low-quality or subprime mortgage debt.

The rating agencies claimed their ratings were opinions that deserved free speech protection under the First Amendment to the US Constitution.

S&P still faces the US Department of Justice's $5bn civil fraud lawsuit filed in February over its ratings, the government's first major post-crisis action against a credit rating agency. The credit rating agency is trying to dismiss that case.

* With Reuters

Related:

Market Performance

Abu Dhabi Commercial Bank
7.35
-0.09 -1.21 (%)
Join the Discussion

Disclaimer:The view expressed here by our readers are not necessarily shared by Arabian Business, its employees, sponsors or its advertisers.

Please post responsibly. Commenter Rules

  • No comments yet, be the first!

Enter the words above: Enter the numbers you hear:

All comments are subject to approval before appearing

Further reading

Features & Analysis
Why PE's back in vogue in the Middle East

Why PE's back in vogue in the Middle East

Confidence is returning to the Gulf’s private equity market after...

The curious case of David Haigh

The curious case of David Haigh

The story of how the former Leeds United boss went from football...

1
How Mashreq hits the sweet spot

How Mashreq hits the sweet spot

Mashreq’s retail operations in a series of Middle Eastern markets...

2
Most Popular
Most Discussed