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JPMorgan (JPM) & Others to Pay $46M to End Rate Swaps Trial
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Several major U.S. and European banks, including JPMorgan (JPM - Free Report) , Goldman Sachs (GS - Free Report) and BNP Paribas SA (BNPQY - Free Report) , intended to pay a combined $46 million to resolve a long-standing lawsuit. The banks are accused of colluding to suppress competition in interest-rate swap trading.
The investors' lawyers submitted a tentative settlement in Manhattan federal court to end the eight-year-old countrywide dispute. The settlement was filed in New York federal court and plaintiffs have asked the US District Judge Paul Oetken to approve it preliminarily.
Bank of America (BAC - Free Report) and Citigroup (C - Free Report) are also accused in the lawsuit. The other defendants in the case are Barclays, Deutsche Bank, Morgan Stanley, and NatWest Group.
Two years ago, Credit Suisse Group AG, agreed to pay $25 million to settle allegations in the case. Now, UBS Group AG, one of the ten companies implicated in the most recent settlement, owns Credit Suisse.
Investors, including the Baltimore City and pension funds in Chicago, Los Angeles, and Michigan, accused the banks of attempting to corner swaps trading between 2013 and 2016. The banks have been charged with controlling those markets to control prices and increase profits by preventing electronic trading platforms from entering them.
Because of their position as dealers, the banks are said to have made "tremendous profits" from this, mainly in the form of bid/ask spreads.
Some instances resulted in major settlements and reforms. Last year, a platform used by banks for stock lending agreed to make adjustments to ‘materially decrease the likelihood of future collusion.’ Four banks paid more than $500 million to settle the dispute but denied wrongdoing.
The swaps deal comes after a court rejected the class-action status of the allegations in December 2023, which significantly weakened the case. Despite the denial, the settlement represents a significant recovery for the plaintiffs given the challenges and uncertainties of further litigation, according to Bloomberg Intelligence analyst.
Pension plans and investors claimed banks overcharged for interest-rate swaps due to their control over an outdated over-the-counter market, hindering the use of electronic platforms for transparency and better prices.
The banks argued that investors were not harmed, pointing to statistics showing that a large number of trades were either losing or did not result in profits. The plaintiffs denied that any trades ever had a poor return.
However, the judge denied class action certification, noting that the plaintiffs failed to successfully challenge the defendant's contention that there were countless trades with zero or negative returns within the relevant period.
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JPMorgan (JPM) & Others to Pay $46M to End Rate Swaps Trial
Several major U.S. and European banks, including JPMorgan (JPM - Free Report) , Goldman Sachs (GS - Free Report) and BNP Paribas SA (BNPQY - Free Report) , intended to pay a combined $46 million to resolve a long-standing lawsuit. The banks are accused of colluding to suppress competition in interest-rate swap trading.
The investors' lawyers submitted a tentative settlement in Manhattan federal court to end the eight-year-old countrywide dispute. The settlement was filed in New York federal court and plaintiffs have asked the US District Judge Paul Oetken to approve it preliminarily.
Bank of America (BAC - Free Report) and Citigroup (C - Free Report) are also accused in the lawsuit. The other defendants in the case are Barclays, Deutsche Bank, Morgan Stanley, and NatWest Group.
Two years ago, Credit Suisse Group AG, agreed to pay $25 million to settle allegations in the case. Now, UBS Group AG, one of the ten companies implicated in the most recent settlement, owns Credit Suisse.
Investors, including the Baltimore City and pension funds in Chicago, Los Angeles, and Michigan, accused the banks of attempting to corner swaps trading between 2013 and 2016. The banks have been charged with controlling those markets to control prices and increase profits by preventing electronic trading platforms from entering them.
Because of their position as dealers, the banks are said to have made "tremendous profits" from this, mainly in the form of bid/ask spreads.
Some instances resulted in major settlements and reforms. Last year, a platform used by banks for stock lending agreed to make adjustments to ‘materially decrease the likelihood of future collusion.’ Four banks paid more than $500 million to settle the dispute but denied wrongdoing.
The swaps deal comes after a court rejected the class-action status of the allegations in December 2023, which significantly weakened the case. Despite the denial, the settlement represents a significant recovery for the plaintiffs given the challenges and uncertainties of further litigation, according to Bloomberg Intelligence analyst.
Pension plans and investors claimed banks overcharged for interest-rate swaps due to their control over an outdated over-the-counter market, hindering the use of electronic platforms for transparency and better prices.
The banks argued that investors were not harmed, pointing to statistics showing that a large number of trades were either losing or did not result in profits. The plaintiffs denied that any trades ever had a poor return.
However, the judge denied class action certification, noting that the plaintiffs failed to successfully challenge the defendant's contention that there were countless trades with zero or negative returns within the relevant period.
Currently, JPM, BNPQY, GS, and C carry a Zacks Rank #3 (Hold), while BAC has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.