RBS Says Legal Action Against Goldman Sachs on Abacus CDOs Is `Premature'

Royal Bank of Scotland Group Plc Chairman Philip Hampton said it would be “premature” for the bank to take legal action against Goldman Sachs Group Inc. over collateralized debt obligations called Abacus.

RBS is reviewing the Securities & Exchange Commission’s case, he said.

“The legal advice is it’s premature for that action,” Hampton told reporters before the bank’s annual general meeting in Edinburgh today. “We will review the process of the SEC and make a decision later.”

Prime Minister Gordon Brown said on April 19 that legal action against Goldman Sachs was possible. Three days earlier the SEC filed a suit against the New York-based bank, citing fraud and misrepresentation in the marketing of a collateralized debt obligation called Abacus 2007-AC1.

RBS unwound a position in Abacus bought by its ABN Amro unit by paying Goldman $840.9 million, the SEC said. Germany’s IKB Deutsche Industriebank AG lost nearly all of its $150 million investment in Abacus, according to the lawsuit.

“We were aware that the SEC was investigating that trade,” Hampton told investors later. “But the announcement came out of the blue, as I think it did to Goldman too. It’s a complicated case. The allegations are being vigorously defended.”

To contact the reporters on this story: Andrew MacAskill in London at amacaskill@bloomberg.net

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