Big banks accused of interest rate-swap fixing in U.S. class action suit

Thu Nov 26, 2015 1:01am EST
 
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By Mike Kentz

NEW YORK (IFR/Reuters) - A class action lawsuit, filed Wednesday, accuses 10 of Wall Street’s biggest banks and two trading platforms of conspiring to limit competition in the $320 trillion market for interest rate swaps.

The class action lawsuit, filed in U.S. District Court in Manhattan, accuses Goldman Sachs Group (GS.N: Quote), Bank of America Merrill Lynch (BAC.N: Quote), JPMorgan Chase(JPM.N: Quote), Citigroup(C.N: Quote), Credit Suisse Group CSGN.VX, Barclays Plc BARC.L, BNP Paribas SA (BNPP.PA: Quote), UBS UBSG.VX, Deutsche Bank AG (DBKGn.DE: Quote), and the Royal Bank of Scotland (RBS.L: Quote) of colluding to prevent the trading of interest rate swaps on electronic exchanges, like the ones on which stocks are traded.

As a result, the lawsuit alleges, banks have successfully prevented new competition from non-banks in the lucrative market for dealing interest rate swaps, the world’s most commonly traded derivative.

The banks “have been able to extract billions of dollars in monopoly rents, year after year, from the class members in this case,” the lawsuit alleged.

Goldman Sachs, Citigroup, Bank of America, BNP Paribas, Credit Suisse and Royal Bank of Scotland declined to comment.

JP Morgan, Barclays, Deutsche Bank and UBS were not immediately available to comment.

The suit was brought by The Public School Teachers' Pension and Retirement Fund of Chicago, which purchased interest rate swaps from multiple banks to help the fund hedge against interest rate risk on debt. The plaintiffs are represented by the law firm of Quinn, Emanuel, Urquhart, & Sullivan LLP, which has taken the lead in a string of antitrust suits against banks.

As a result of the banks’ collusion, the suit alleges, the Chicago teachers’ pension and retirement fund overpaid for those swaps.   Continued...

 
A Goldman Sachs sign is seen above the floor of the New York Stock Exchange shortly after the opening bell in the Manhattan borough of New York January 24, 2014.  REUTERS/Lucas Jackson