Bank of America, Barclays, Citigroup, and four other well-known global banks have finally settled a lawsuit in the United States in which they were accused of manipulating the market.
The banks have all agreed to pay $324 million to settle their claims, which state that the banks colluded in setting the ISDAfix benchmark
Details of the illegal activity the banks were suspected of implementing include executing rapid trades right before the rate was set each day. This is commonly called “banging the close,” which causes the British brokerage ICAP to delay trades until ISDAfix is moved and rates that don’t show market activity are posted.
While the banks will pay a total of $324 million, the amount is broken up for each of the seven banks to pay a share. According to the settlement, which was made public on May 3, JPMorgan will pay $52 million; Bank of America, Credit Suisse, Deutsche Bank, and Royal Bank of Scotland Group Plc (RBS) will each pay $50 million; Citigroup will pay $42 million; and Barclays will pay $30 million.
“We are very pleased that these banks are offering our clients hundreds of millions of dollars in recovery,” said David R. Scott, managing partner of Scott and Scott.
Attention-grabbing scandals like these are part of the reason only 21% of Americans had confidence in their banks in 2014. This is a significant drop from the more than half of Americans who had confidence in their banks in 1980.
The lawsuit began when a group of investors from an Alaskan pension fund raised “plausible allegations that a conspiracy among the defendants existed.” The investors claimed that starting in 2009, the accused banks utilized electronic chat rooms and other private communication methods to rig ISDAfix by submitting identical rate quotes. As a result, they lost out on millions of dollars.
This private lawsuit is just one of many that are currently pending in Manhattan federal court. There are more lawsuits accusing banks of conspiring to also rig rate benchmarks, securities prices, and commodities prices.