Banks agree $1.9bn antitrust deal

BY Richard Summerfield

A number of the world’s biggest banks have agreed a $1.9bn settlement to resolve the claims of investors who alleged that the banks conspired to fix prices and freeze competitors out of the market for credit default swaps.

Twelve banks and two industry groups stuck a preliminary agreement with the plaintiffs in a civil suit which will see the financial institutions pay $1.87bn to settle the case, which was borne out of a raft of regulatory activity and private lawsuits which alleged that the banks manipulated foreign-exchange and commodity markets, as well as interest-rate benchmarks. Those cases have resulted in a number of banks paying fines worth billions of dollars.

Should the deal win final approval it will see the group of defendant banks - Bank of America Corp, Barclays PLC, BNP Paribas SA, Citigroup Inc, Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group Inc, HSBC Holdings PLC, J.P. Morgan Chase & Co, Morgan Stanley, Royal Bank of Scotland Group PLC and UBS Group AG – agree to pay one of the largest antitrust settlements in US history.

Though a tentative agreement has been reached there are still some issues which must be resolved. The settlement would also need to meet with a judge’s approval, but this is a significant step as it would avert a costly and expensive trial.

The plaintiff group, made up of a number of hedge funds, pension funds, university endowments, small banks and other investors, alleged that the banks "made billions of dollars in supracompetitive profits’ by taking advantage of ‘price opacity in the CDS market".

In an interview with Bloomberg TV Daniel Brockett, a partner at the plaintiffs’ law firm Quinn Emanuel Urquhart & Sullivan LLP, noted that the formal agreement of the deal would take about 10 days to come through. “We are pleased to have reached agreement on many of the important terms, including the amount of the settlement, but there are a few issues that remain to be discussed and negotiated," said Mr Brockett.

Under the terms of the settlement the banks will pay different amounts towards the settlement. The size of each bank’s contribution will be derived from its share of CDS trading.

A spokesman for the International Swaps and Derivatives Association (ISDA) said the group was “pleased the matter is close to resolution". He added: “ISDA remains committed to further developing [swaps] market structure to ensure the market functions safely and efficiently." ISDA had previously noted that the allegations against the banks were without merit.

News: Big banks in $1.865bn swaps price-fixing settlement

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