Sun, Sep 13, 2015 - Page 13 News List

Twelve banks agree CDS price-fixing settlement

CLASS-ACTION LAWSUIT:A dozen of the largest banks in the world agreed to a settlement of US$1.9 billion to investors accusing them of rigging the CDS market


A dozen major banks on Friday agreed to pay US$1.9 billion to settle allegations of price-fixing in the market for credit default swaps (CDS), a derivative that acts as insurance against bond defaults.

JPMorgan Chase & Co, BNP Paribas of France and Barclays of Britain were among the banks striking the deal to settle investor allegations in US District Court in Manhattan, a lawyer for the plaintiffs said.

“All defendants in the case agreed, including 12 of the world’s largest banks,” lawyer Dan Brockett said in an e-mail.

A group of investors led by the pension fund of a unit of the Sheet Metal Workers union filed the class-action lawsuit in 2013. They accused the defendants of rigging the CDS market and making them pay unfairly higher prices.

CDS are a murky corner of the financial sector that is under scrutiny by authorities in several countries. The swaps were used widely as speculative tools during and after the 2008 financial crisis.

The other banks in the settlement are four US banks, Bank of America Corp, Citigroup Inc, Goldman Sachs Group Inc and Morgan Stanley; and five foreign banks: Credit Suisse Group AG, Deutsche Bank AG, HSBC Holdings PLC, Royal Bank of Scotland Group PLC and UBS Group AG.

Among other defendants was Markit Group Ltd, a British firm that provides financial information services, including on the CDS market.

Brockett said the US$1.866 billion settlement agreement was expected to be finalized in seven to 10 days.

The US Department of Justice and the European Commission, the EU’s executive arm, have ongoing investigations of these same banks, Markit Group and the International Swaps and Derivatives Association, a trade group representing participants in the over-the-counter derivatives market.

About 2 million CDS are in circulation worldwide, representing US$11 trillion.

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