In Europe

British, German regulators to probe Goldman's sale of mortgage securities

Tuesday, April 20, 2010

Financial regulators in Britain and Germany said Monday that they will open investigations to see whether Goldman Sachs's sale of mortgage securities broke any local laws after the disclosure that two European banks lost money on what U.S. officials allege were fraudulent deals.

London's Financial Services Authority and Germany's BaFin regulatory agency said they were coordinating with the U.S. Securities and Exchange Commission's investigation of Goldman's sale of an investment that, the SEC charges, was structured to fail.

The Royal Bank of Scotland lost an estimated $850 million and the Duesseldorf-based IKB Deutsche Industriebank lost more than $100 million on mortgage-related securities set up by Goldman.

"The FSA is investigating the circumstances of this case and whether there are any implications for the U.K.-regulated entities of Goldman Sachs," the FSA said. "If there are, we will take appropriate action."

In Germany, a spokesman for bank regulator BaFin said the agency would "follow up" with the SEC to see what action might be appropriate.

-- Howard Schneider

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