RBS faces legal action for role in MF Global collapse

Royal Bank of Scotland is facing legal action over the collapse of MF Global after two pension funds accused the bank of making misleading statements about the broker's $6.3bn (£3.9bn) exposure to European sovereign debt.

The IBEW Local 90 Pension Fund and the Plumbers & Pipefitters' Local #562 Pension Fund are suing RBS, JP Morgan and Goldman Sachs in a class action lawsuit in New York, following the collapse of the broker, Bloomberg reported according to the Telegraph.

The pension funds claim MF Global's stock traded at "artificially inflated prices," as a result of the banks' misleading statements.

"While the extent of MF Global's exposure to European sovereign debt was concealed, the defendants were able to raise some $900m in the offerings," they said.

The funds' case is understood to rest on a number of notes, largely underwritten by JP Morgan and Goldman Sachs.

However, RBS, which is 83% owned by British tax payers, has also underwritten a small percentage - leaving it exposed if MF Global's clients do not recover their money. RBS declined to comment.

Other defendants named in the case include Bank of America, Deutsche Bank, Citigroup and Jeffries.

MF Global executives are also named including Jon Corzine, the former joint chief executive of Goldman Sachs who ran the business before it failed.

MF Global filed for bankruptcy less than two weeks ago after it took a $6.3bn position on European government debt which was undone by eurozone market volatility and destroyed market confidence in MF Global.