Sixteen banks that were facing claims accusing them of fixing global benchmark interest rates had a victory Friday when a U.S. judge dismissed a “substantial portion” of the claims.
The banks included in these lawsuits were Credit Suisse Group AG (NYSE:CS), HSBC Holdings (NYSE:HBC), Bank of America (NYSE:BAC), JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C), Royal Bank of Canada (NYSE:RY), Royal Bank of Scotland (NYSE:RBS), Deutsche Bank AG (NYSE:DB), and WestLB AG.
The lawsuits were by private individuals, and there was a wide range of plaintiffs including the city of Baltimore and bondholders. These plaintiffs accused the banks of conspiring to manipulate the London Interbank Offered Rate (Libor), which is a measurement of more than $550 trillion in financial products.
The Libor is set everyday in London by a group of international banks.The banks submit rates of what it costs to borrow from one another for varying rates from overnight up to one year. These rates then affect hundreds of trillions of dollars worth of investments. In their law suits, the plaintiffs allege that the banks conspired to fix the interest rate by sending in false information.
On Friday though, Judge Naomi Buchwald dismissed a number of claims against the banks including federal antitrust claims, racketeering and state law claims. The judge also partially dismissed claims of commodities manipulation. Some of the claims were allowed to continue, and the plaintiffs still have the option of refiling the lawsuits. It is likely that the banks will be willing to discuss settlement after this victory on Friday.
In addition to lawsuits by private plaintiffs, many banks are also facing investigation by regulatory agencies in Europe, the United States, and the UK. These regulatory investigations mean that banks may be more willing to settle with plaintiffs instead of trying to fight the lawsuits. It is important to see how these lawsuits will affect the ongoing regulatory investigations and vice-versa.
Here’s how these bank stocks traded this week: