Customers to warn KBC bank over CDOs-newspaper

BRUSSELS, July 4 (Reuters) - Disgruntled clients are set to serve Belgian bank KBC (KBC.BR) with papers saying it didn't properly warn of risks involved with collateralised debt obligations (CDOs,) Belgian newspaper De Tijd said on Saturday.

Citing Laurent Arnauts, a partner at the same Modrikamen law office that challenged the break-up of Fortis and who is representing KBC clients, De Tijd said the warning would either be followed by a settlement or by legal action.

The article said that Arnauts and his clients would also accuse the Belgian banking and insurance group of not having correctly followed risk guidelines attached to the CDOs, and of having composed its CDO portfolios improperly.

"He said this is on behalf of a number of customers who bought CDOs with KBC," KBC spokeswoman Viviane Huybrecht told Reuters, noting KBC in February received questions from some customers about their CDOs, and since then has been conducting its own investigation.

"At that time we said, proactively, we would look at all customer files, and if after a thorough investigation, we found there had been shortcomings on behalf of KBC, we would assume our responsibilities," she said, adding the probe was ongoing.

She said she couldn't say precisely how many KBC customers had bought CDOs, but said only a "limited" number had complained about them.

No representatives from the Modrikamen law firm were available to comment on the report.

Serving KBC with the papers was "the first step in resolving the case," Arnauts is quoted as saying in the article.

(Reporting by Anne Jolis, Editing by Peter Blackburn)