French prosecutor to charge KBC over toxic debt-source

PARIS/BRUSSELS Fri May 31, 2013 12:05pm EDT

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PARIS/BRUSSELS May 31 (Reuters) - The French prosecutor's office has begun proceedings to charge Belgian bank KBC with fraud over its handling of toxic loans that went sour during the 2008 financial crisis, a source in the prosecutor's office said.

The charges are linked to a lawsuit filed by Paris-based money manager Shanti Asset Management against KBC in 2008, which alleged the bank did not keep its promise to replace assets backing a complex repackaged debt security known as a collateralised debt obligation (CDO), daily Le Figaro reported.

KBC said it was aware of the case but declined to comment further.

Many major banks have fought legal battles over debt instruments that blew up during the financial crisis. KBC has been sued before over allegedly missold CDOs, though it has often managed to reach settlements.

A hearing is due in October, the prosecutor's office said. (Reporting by Chine Labbe in Paris and Philip Blenkinsop in Brussels; Writing by Lionel Laurent; Editing by David Holmes)

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