Seven banks to pay $324 million to settle suit

By: |
Washington | May 04, 2016 2:22 PM

Seven big banks, including Bank of America, JP Morgan, Credit Suisse and Deutsche Bank, have agreed to pay a total of USD 324 million to settle a lawsuit accusing them of market manipulation of interest rates.

Bank of America, JP Morgan, Credit SuisseIn all, about 15 banks were named in the suit for alleged manipulation of the ISDAfix rate, the benchmark for interest rate derivatives.(Reuters)

Seven big banks, including Bank of America, JP Morgan, Credit Suisse and Deutsche Bank, have agreed to pay a total of USD 324 million to settle a lawsuit accusing them of market manipulation of interest rates.

The settlement yesterday followed a federal judge’s ruling in March, admitting the class action lawsuit brought by investors and pension funds against the banks.

In all, about 15 banks were named in the suit for alleged manipulation of the ISDAfix rate, the benchmark for interest rate derivatives.

US District Judge Jesse Furman, in rejecting a motion to dismiss the suit, said the claims were similar to those made against some of the same banks involving manipulation of the London interbank offered rate, or Libor, lawyers for the plaintiffs said.

“It appears that sort of rate manipulation can be economically sensible and feasible given that many banks (including some defendants) have admitted that in approximately the same period of time, they conspired to fix similar benchmark rates — namely, Libor and the leading benchmark interest rate for the foreign exchange market in order to maximise profits,” Furman was quoted as saying by the plaintiffs’ lawyers.

The banks were suspected of agreeing among themselves between 2009 and 2012 to set the daily benchmark rate for interest rate exchange contracts, or swaps.

To accomplish that, the plaintiffs charged, they would make multiple electronic orders just before setting the rate, delaying other ongoing operations that had been made at different rates.

Under the settlement, JP Morgan will pay USD 52 million, while Bank of America, Credit Suisse, Deutsche Bank and the Royal Bank of Scotland will pay USD 50 million each.

Citigroup will pay USD 42 million and British bank Barclays Plc USD 30 million.

“We are very pleased that these banks are offering our clients hundreds of millions of dollars in recovery,” said David Scott, a lawyer for the plaintiffs.

The banks had no immediate comment.

“We will continue to vigorously pursue relief from the remaining defendants, substantially aided by the cooperation we secured in these settlements,” Scott said.

Eight other banks were not part of the settlement, including BNP Paribas, Goldman Sachs, HSBC and Morgan Stanley.

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