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29 Legal, competition and regulatory matters continued
RMBS Securities Claims
Background
As a result of some of the RMBS activities described above, the Group is party to a number of lawsuits filed by purchasers of RMBS sponsored and/or
underwritten by the Group between 2005 and 2008. As a general matter, these lawsuits allege, among other things, that the RMBS offering
materials allegedly relied on by such purchasers contained materially false and misleading statements and/or omissions and generally demand
rescission and recovery of the consideration paid for the RMBS and recovery of monetary losses arising out of their ownership.
Recent Developments
The Group has settled a number of these claims, including in October 2015 a settlement with the National Credit Union Administration to resolve two
outstanding civil lawsuits for $325m.
Claimed Amounts/Financial Impact
If the Group were to lose the pending actions the Group believes it could incur a loss of up to the outstanding amount of the RMBS at the time of
judgment, plus any cumulative losses on the RMBS at such time and any interest, fees and costs, less the market value of the RMBS at such time
and less any provisions taken to date.
The original face amount of RMBS related to the pending civil actions against the Group total approximately $1.3bn, of which approximately $0.4bn
was outstanding as at 31 December 2015. Cumulative realised losses reported on these RMBS as at 31 December 2015 were approximately $0.1bn.
Although the purchasers in the remaining securities actions have generally not identified a specific amount of alleged damages, the Group has
estimated the total market value of these RMBS as at 31 December 2015 to be approximately $0.3bn. The Group may be entitled to indemnification
for a portion of such losses.
Mortgage-related Investigations
In addition to the RMBS Repurchase Requests and RMBS Securities Claims, numerous regulatory and governmental authorities, amongst them the
DOJ, SEC, Special Inspector General for the US Troubled Asset Relief Program, the US Attorney’s Office for the District of Connecticut and the US
Attorney’s Office for the Eastern District of New York have been investigating various aspects of the mortgage-related business, including issuance
and underwriting practices in primary offerings of RMBS and trading practices in the secondary market for both RMBS and CMBS. The Group
continues to respond to requests relating to the RMBS Working Group of the Financial Fraud Enforcement Task Force (RMBS Working Group), which
was formed to investigate pre-financial crisis mortgage-related misconduct. In connection with several of the investigations by members of the
RMBS Working Group, a number of financial institutions have entered into settlements involving substantial monetary payments.
Claimed Amounts/Financial Impact
It is not currently practicable to provide an estimate of the financial impact of the actions described on the Group or what effect that they might have
upon the Group’s operating results, cash flows or financial position in any particular period, but the cost of resolving these investigations could
individually or in aggregate prove to be substantial.
American Depositary Shares
BPLC, BBPLC and various former members of BPLC’s Board of Directors have been named as defendants in a securities class action consolidated in
the SDNY alleging misstatements and omissions in offering documents for certain American Depositary Shares issued by BBPLC in April 2008 with
an original face amount of approximately $2.5 billion (the April 2008 Offering).
Background Information
The plaintiffs have asserted claims under the Securities Act of 1933, alleging that the offering documents for the April 2008 Offering contained
misstatements and omissions concerning (amongst other things) BBPLC’s portfolio of mortgage-related (including US subprime-related) securities,
BBPLC’s exposure to mortgage and credit market risk, and BBPLC’s financial condition. The plaintiffs have not specifically alleged the amount of their
damages.
In June 2014, the SDNY denied the defendants’ motion to dismiss the claims. The case is in discovery.
Claimed Amounts/Financial Impact
It is not currently practicable to provide an estimate of the financial impact of the action described on the Group or what effect that it might have
upon the Group’s operating results, cash flows or financial position in any particular period.
BDC Finance L.L.C.
BDC Finance L.L.C. (BDC) filed a complaint against BBPLC in the NY Supreme Court alleging breach of contract in connection with a portfolio of total
return swaps governed by an ISDA Master Agreement (collectively, the Agreement). Parties related to BDC have also sued BBPLC and BCI in
Connecticut State Court in connection with BBPLC’s conduct relating to the Agreement.
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