Seven Major Banks Pay Chump Change to Settle Lawsuit Over Lucrative Scheme

Seven of the world's biggest banks agreed to pay $324 million to settle a lawsuit accusing them of rigging an interest rate benchmark used in the $553 trillion derivatives market.
May 4, 2016, 2:28pm

Seven of the world's biggest banks have agreed to pay $324 million to settle a private US lawsuit accusing them of rigging an interest rate benchmark used in the $553 trillion derivatives market.

The settlement made public on Tuesday, which requires court approval, resolves antitrust claims against Bank of America, Barclays, Citigroup, Credit Suisse, Deutsche Bank, JPMorgan Chase, and Royal Bank of Scotland.

While $324 million might seem like a hefty sum for a settlement, it's a relative pittance for the banks involved in the lawsuit. Bank of America alone netted $15.89 billion in profit in 2015. It was the bank's best showing since 2006 and more than double what it earned in 2014, an improvement that the Wall Street Journal attributed in large part to a significant drop in its legal fines and related costs.

The plaintiffs in the lawsuit had initially sought to recoup billions of dollars in losses.

"We are very pleased that these banks are offering our clients hundreds of millions of dollars in recovery," David R. Scott, an attorney representing the plaintiffs said in a statement on Tuesday.

Several pension funds and municipalities accused 14 banks, including those that settled, of conspiring to rig the "ISDAfix" benchmark for their own gain from at least 2009 to 2012.

Related: Bernie Sanders Can't Explain How He'd Break Up Big Banks, Among Other Things

Companies and investors use ISDAfix to price swaps transactions, commercial real estate mortgages and structured debt securities.

The alleged illegal activity included the execution of rapid trades just before the rate was set each day, called "banging the close," causing the British brokerage ICAP Plc to delay trades until they moved ISDAfix where they wanted, and posting rates that did not reflect market activity.

Under the settlement, payments would include $52 million from JPMorgan; $50 million each from Bank of America, Credit Suisse, Deutsche Bank and RBS; $42 million from Citigroup and $30 million from Barclays.

The remaining defendants are BNP Paribas SA, Goldman Sachs, HSBC, Morgan Stanley, Nomura Holdings, UBS AG, Wells Fargo, and ICAP, lawyers for the plaintiffs said.

Spokespeople for BNP Paribas, HSBC, Morgan Stanley and UBS declined to comment. The other non-settling defendants did not immediately respond to requests for comment.

Tuesday's accord came five weeks after US District Judge Jesse Furman in Manhattan refused to dismiss the lawsuit.

US and European regulators have also examined whether ISDAfix was set properly, and Barclays agreed last May to pay a $115 million fine to settle a US Commodity Futures Trading Commission probe.

The private lawsuit is one of many pending in Manhattan federal court accusing banks of conspiring to rig rate benchmarks, securities prices or commodities prices.

Follow VICE News on Twitter: @vicenews