Barclays Wins Dismissal of NCUA Case - Analyst Blog


Barclays PLC ( BCS ) heaved a sigh of relief when the U.S. District Judge in Kansas City dismissed a case by National Credit Union Administration (NCUA) - the U.S. regulator for credit unions. The lawsuit had accused the company of selling risky mortgage based securities (MBS) worth approximately $555 million from 2006-2007.

While dismissing the case, the U.S. District Judge stated that the NCUA had waited too long to file the case against Barclays. The chargesheet should have been lodged within 3 years (by Mar 20, 2012) of the NCUA being named the conservator of credit unions. However, the case was filed in Sep 2012.

Barclays was accused of selling MBS to 2 corporate credit unions - the U.S. Federal Credit Union and the Western Corporate Federal Credit Union - leading to their failure in 2009. Since then, the NCUA has been trying to recover the losses.

The dismissal of the case is a setback for the NCUA. The regulator had sued 10 major global banks on similar charges.

Out of these, Bank of America Corporation ( BAC ), Deutsche Bank AG, HSBC Holdings plc ( HBC ) and Citigroup Inc. settled their respective cases with the NCUA, thereby enabling the regulator to recover roughly $335 million. However, Credit Suisse Group, Goldman Sachs Group Inc., Wells Fargo & Company, JPMorgan Chase & Co. ( JPM ) and UBS AG continue to face similar charges from the NCUA.

The dismissal of the case removes a legal headwind for Barclays. However, the company still faces a number of lawsuits related to its conduct during the financial crisis. Though the London Interbank Offered Rate (LIBOR) manipulation scandal led to a fine of £290 million ($453 million) in Jun 2012, Barclays has moved forward to regain investors' confidence through various transformational initiatives.

Currently, Barclays carries a Zacks Rank #3 (Hold).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: BAC , BCS , HBC , JPM

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