Two financial institutions have lost an Australian court appeal against a decision that they "deceived" investors prior to the 2008 financial crisis.
Credit ratings agency Standard & Poor's and Dutch bank ABN Amro are being sued over financial products that lost most of their value in the downturn. The case was brought by 12 Australian local authorities.
S&P and ABN Amro should be liable for 100% of the losses suffered, the court said on Friday. Australia's federal court dismissed appeals by Standard & Poor's and ABN Amro after investors successfully sued the firms.
The initial 2012 ruling said that the companies should be liable for 33% of the value of the credit derivatives.
The councils sued after being assured by Local Government Financial Services, an investment manager which sold the so-called "Rembrandt" notes arranged by ABN Amro in late 2006, that they had a less than 1% chance of defaulting.
Within six months, the councils lost A$16m ($14.9m, £8.9m), or 90% of the funds they had invested. The products should not have been given triple-A ratings by S&P, the court said.
The case was the one of the first against a rating agency over financial products widely cited as one of the factors that triggered the 2008 crisis. S&P said it was disappointed by Friday's ruling, but declined to say whether it would appeal again.
"We continue to believe that it is bad policy to enforce a legal duty against a party like S&P, which has no relationship with investors who use rating opinions, yet impose no responsibility on those investors to conduct their own due diligence," it said in a statement.
ABN Amro's investment division was owned by RBS at the time the derivatives were sold. RBS declined to comment on Friday. S&P is facing legal action in other parts of the world over its ratings prior to the financial crisis.
In the US, sixteen states may pursue claims alleging that S&P issued misleading credit ratings.
bbc.com
Credit ratings agency Standard & Poor's and Dutch bank ABN Amro are being sued over financial products that lost most of their value in the downturn. The case was brought by 12 Australian local authorities.
S&P and ABN Amro should be liable for 100% of the losses suffered, the court said on Friday. Australia's federal court dismissed appeals by Standard & Poor's and ABN Amro after investors successfully sued the firms.
The initial 2012 ruling said that the companies should be liable for 33% of the value of the credit derivatives.
The councils sued after being assured by Local Government Financial Services, an investment manager which sold the so-called "Rembrandt" notes arranged by ABN Amro in late 2006, that they had a less than 1% chance of defaulting.
Within six months, the councils lost A$16m ($14.9m, £8.9m), or 90% of the funds they had invested. The products should not have been given triple-A ratings by S&P, the court said.
The case was the one of the first against a rating agency over financial products widely cited as one of the factors that triggered the 2008 crisis. S&P said it was disappointed by Friday's ruling, but declined to say whether it would appeal again.
"We continue to believe that it is bad policy to enforce a legal duty against a party like S&P, which has no relationship with investors who use rating opinions, yet impose no responsibility on those investors to conduct their own due diligence," it said in a statement.
ABN Amro's investment division was owned by RBS at the time the derivatives were sold. RBS declined to comment on Friday. S&P is facing legal action in other parts of the world over its ratings prior to the financial crisis.
In the US, sixteen states may pursue claims alleging that S&P issued misleading credit ratings.
bbc.com
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