Barclays PLC (BCS - Free Report) 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 - Free Report) , Deutsche Bank AG, HSBC Holdings plc 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 - Free Report) 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).