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Seven major banks to pay $324 million over accusations of manipulating interest rates

The money is to settle a lawsuit that followed a ruling in March.

Image: Shutterstock/wongwean

SEVEN BIG BANKS, including Bank of America, JP Morgan, Credit Suisse and Deutsche Bank, have agreed to pay a total of $324 million to settle a lawsuit accusing them of market manipulation of interest rates.

The settlement 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.

Electronic orders

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.

Furman was quoted as saying by the plaintiffs’ lawyers:

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.

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.

Million dollar payouts

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

Citigroup will pay $42 million and British bank Barclays Plc $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.

 © AFP, 2016

Read: Irish businesses are paying the highest interest rates in the eurozone>

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