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Articles Tagged with Société Générale

In the UK, the US government is suing several banks over Libor rigging allegations in High Court. The defendants in the London Interbank Offered Rate (Libor) manipulation lawsuit include Deutsche Bank (DB), Barclays (BARC), Royal Bank of Scotland (RBS), Lloyds Banking Group, UBS (UBS), Rabobank (RABO), and several other banks, in addition to the British Bankers Association.

According to the Federal Deposit Insurance Corporation’s claim, the banks would engage in lowballing by turning in estimates that were artificially low when participating in the daily process to set the Libor rate. The US agency said that it is suing for 39 US banks, which were once collectively valued at over $400M, that failed after they depended on the US dollar denominated-Libor variant for derivative and other transactions. FDIC contends that the inaccurate figures submitted by the European banks caused the US banks to sustain massive losses.

It believes that if the Libor rate had been set honestly, the benchmark’s rate would would have been higher and these banks would have achieved higher prices and larger returns on different mortgages, loans, options, swaps, and other Libor-tied agreements. Instead, the plaintiffs allegedly colluded together to keep borrowing rates down to make it appear as if the banks were in more robust financial health than what was actual. The FDIC argued that the joint efforts of the banks and the British Bankers Association resulted in the “sustained and material suppression of Libor” from August 2007 through at least 2009.

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In a deal reached with the US Justice Department, Société Générale will pay $50M to settle civil charges accusing the bank of hiding that the residential mortgaged-backed securities (RMBS) that it promoted and sold were of poor quality. According to the government, the French bank made false representations involving the SG Mortgage Securities Trust 2006-OPT2, a $780M debt issue that it organized more than a decade ago. As part of the settlement, Société Générale admitted that it hid how many of the loans underlying the RMBS shouldn’t have been securitized or were not properly underwritten.

In a statement of facts, Société Générale took responsibility for its conduct. The bank admitted that it falsely represented that loans underlying the residential mortgage-backed security had been originated according to the underwriting guidelines of the loan originator. It also represented to investors that when the SG 2006-OPT2 was originated, no loans in the RMBS had a combined loan-to-value ratio or loan-to-value greater than 100%–this is a claim that Societe General is now admitting was false.

As a result of the bank’s actions, said the DOJ, investors lost “significant” amounts of money and they may lose more. Investors that were impacted include a number of financial institutions that are federally insured.

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