Seven big banks, including Bank of America Corp, JPMorgan Chase & Co, Credit Suisse Group AG and Deutsche Bank AG, have agreed to pay a total of US$324 million to settle a lawsuit accusing them of market manipulation of interest rates.
The settlement on Tuesday 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 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 maximize 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, JPMorgan will pay US$52 million, while Bank of America, Credit Suisse, Deutsche Bank and the Royal Bank of Scotland PLC will pay US$50 million each.
Citigroup Inc will pay US$42 million and British bank Barclays PLC US$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.
“We will continue to vigorously pursue relief from the remaining defendants, substantially aided by the cooperation we secured in these settlements,” Scott said.
Eight banks were not part of the settlement, including BNP Paribas SA, Goldman Sachs Group Inc and HSBC Holdings PLC.
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