Big banks must face suit for alleged rate rigging

by Ryan Smith30 Mar 2016
More than a dozen big banks will have to face a lawsuit accusing them of rigging an interest rate benchmark used to price commercial real estate mortgages and other derivatives.

A group of investors – led by several pension funds and municipalities – allege that some of the world’s largest banks conspired to rig “ISDAfix,” an interest rate benchmark used to price derivatives, according to a Reuters report. The 14 defendants in the suit include Bank of America, Barclays, Citigroup, JPMorgan Chase and Wells Fargo.

The banks are accused of “banging the close” – executing rapid trades just before the rate was set each day – causing ICAP to delay trades and post rates that didn’t reflect actual market activity, according to Reuters.

On Monday, U.S. District Judge Jesse Furman ruled that the plaintiffs could pursue federal antitrust claims against the banks. The lawsuit is attempting to recoup billions of dollars in losses arising from the alleged interest rate rigging, according to Reuters.

If the banks did collude to fix the rate, Furman wrote in his decision, “that sort of coordinated action in a supposedly competitive market is precisely the sort of anticompetitive behavior the antitrust laws were intended to prevent.”


Should CFPB have more supervision over credit agencies?