Civil Antitrust Claims Reinstated Against 16 Banks in Libor Case -- 3rd Update
May 23 2016 - 3:13PM
Dow Jones News
By Nicole Hong
In a setback for some of the world's largest financial
institutions, a U.S. appeals court on Monday reinstated the private
antitrust lawsuits filed against 16 banks for allegedly rigging
Libor interest rates.
The ruling from the Court of Appeals for the Second Circuit
reverses a lower court decision from 2013, in which U.S. District
Judge Naomi Buchwald dismissed the claims because she said the
banks' alleged conduct did not violate federal antitrust laws.
The lawsuits accuse 16 major banks -- including J.P. Morgan
Chase & Co., Bank of America Corp. and Citigroup Inc. -- of
collusion in manipulating the London interbank offered rate, or
Libor, to the detriment of the banks' consumers.
The plaintiffs, who owned various financial instruments that
were affected by Libor, claim the returns on their investments were
depressed by the banks' collusion. The lawsuits were filed by
several groups of plaintiffs, including the local governments of
cities like Baltimore, San Diego and Houston.
Judge Buchwald had dismissed the antitrust claims, saying the
plaintiffs failed to show they were injured by the alleged rate
manipulation. She said that because setting Libor was a
"cooperative endeavor," there could be no anticompetitive harm to
consumers.
But the appeals court Monday disagreed and kicked the case back
to the lower court for further proceedings. A three-judge panel
found that the plaintiffs did show an antitrust injury "by alleging
that they paid artificially fixed higher prices."
Judge Buchwald in 2013 had allowed other claims by the
plaintiffs to proceed, including allegations that the banks
breached commodities laws, but the antitrust claims were a central
part of the litigation, as violations can require a defendant to
pay triple damages.
The appellate judges noted that the plaintiffs will still have
to prove at a later stage whether the allegedly corrupt Libor rate
did have an influence on the prices of their financial
investments.
If this litigation is ultimately successful, the potential total
bill to banks could be in the billions, analysts have
estimated.
A lawyer representing the banks declined to comment, while a
lawyer for the plaintiffs did not immediately respond to a request
for comment.
Libor, a widely used benchmark that helps set interest rates for
everything from mortgages to corporate loans, is calculated daily
for different currencies based on estimated borrowing rates
submitted by banks on panels. The lawsuits are targeting banks on
the panel that sets U.S. dollar rates under Libor.
These private lawsuits are separate from the sprawling criminal
and civil probes around Libor rigging, which began in 2008 and have
implicated traders around the world. Regulators have accused big
banks of letting their traders and executives raise Libor rates up
or down to benefit their trading positions.
About a dozen financial firms have settled charges of
manipulating Libor, and many have pleaded guilty to criminal
charges. The largest penalty imposed was the $2.5 billion paid by
Deutsche Bank AG last year.
In total, U.K. and U.S. authorities have imposed sanctions of
more than $6 billion in the Libor cases. A series of global
investigations are still ongoing, but The Wall Street Journal
reported in February that regulators in the U.S. and U.K. are
preparing to bring a final round of civil charges against several
banks in the probe.
The defendants affected by the appellate ruling Monday are Bank
of America Corp., Bank of Tokyo-Mitsubishi UFJ Ltd., Barclays PLC,
Citigroup Inc., Credit Suisse Group AG, Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A. (Rabobank), Deutsche Bank AG, HSBC
Holdings PLC, J.P. Morgan Chase & Co., The Norinchukin Bank,
Portigon AG/Westdeutsche ImmobilienBank AG, Lloyds Banking Group
PLC, Royal Bank of Canada, Société Générale, UBS Group AG and The
Royal Bank of Scotland Group PLC.
Write to Nicole Hong at nicole.hong@wsj.com
(END) Dow Jones Newswires
May 23, 2016 14:58 ET (18:58 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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