Major financial institutions, including JPMorgan and BofA, are reportedly in negotiations for a potential $46 million settlement related to interest rate swaps.
In a recent development, ten major banks have agreed to pay $46 million to settle an antitrust lawsuit alleging collusion to manipulate the EURIBOR interest rate used in the derivatives market, particularly interest rate swaps, from June 1, 2005, to March 31, 2011.
The banks, including JPMorgan Chase, Goldman Sachs, Citi, BNP Paribas, Bank of America, Morgan Stanley, UBS, Barclays, Deutsche Bank, and NatWest, have admitted no wrongdoing in the settlement. The case is a continuation of a previous one where JPMorgan agreed to pay part of a $1.86 billion settlement to resolve claims that a dozen big banks plotted to limit competition in the credit-default swaps market.
The antitrust lawsuit alleges that the banks coordinated to rig EURIBOR submissions, manipulating prices to benefit their derivatives trading positions through communication among 4 to 8 banks, including calls, meetings, and industry events. Intermediaries like ICAP were also involved in distorting market perceptions.
Regarding the settlement amount and class certification, the U.S. Court of Appeals for the Second Circuit (Sullivan v. UBS AG) recently denied class certification. This means the court did not approve the plaintiffs' request to represent all affected parties as a class in this case, which impacts how damages might be pursued and distributed. As a result, the financial stakes in related interest rate-related banking lawsuits are significant but do not confirm a precise settlement for the EURIBOR collusion case.
The settlement administrator and certain administrative fees have been authorized. If approved, the total value of settlements in the case will be $71 million. This settlement is one of many litigations spanning over a decade, alleging big banks have sought to manipulate various markets, including credit-default swaps, U.S. Treasuries, currencies, and commodities.
Attorneys for the plaintiff investors filed a proposed settlement on Thursday in the U.S. District Court for the Southern District of New York. The banks are accused of boycotting three emerging platforms that offered more competitive prices and facilitated direct trades between buy-side investors.
The case was brought by the city of Baltimore and pension funds in Los Angeles, Chicago, and Michigan in June 2016. The judge in December denied the plaintiffs' motion for class certification in the interest rate swaps case. The case has not been resolved, and the banks continue to deny any wrongdoing.
While this settlement marks a step forward in the legal proceedings, the overall outcome of the case remains uncertain. The banks' denial of wrongdoing and the ongoing nature of the case suggest that further developments are likely to unfold in the coming months.
- The financial implications of the case are substantial, as the total value of settlements in the EURIBOR collusion case is expected to reach $71 million, if approved.
- The ongoing business practice allegations against the banks include boycotting emerging platforms that offered more competitive prices in the interest rate swaps market, which has yet to be fully resolved.
