Big banks in $1.865 billion swaps price-fixing settlement

Fri Sep 11, 2015 3:07pm EDT
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By Jonathan Stempel

NEW YORK (Reuters) - Twelve major banks have reached a $1.865 billion settlement to resolve investor claims that they conspired to fix prices and limit competition in the market for credit default swaps, a lawyer for the investors said on Friday.

The settlement in principle was disclosed at a hearing before U.S. District Judge Denise Cote in Manhattan.

"We think it's historic," Daniel Brockett, the investors' lawyer, said in an interview. "It's one of the largest antitrust class-action settlements, and an extraordinary result for the class."

The defendants include Bank of America Corp (BAC.N: Quote), Barclays Plc (BARC.L: Quote), BNP Paribas SA (BNPP.PA: Quote), Citigroup Inc (C.N: Quote), Credit Suisse Group AG CSGN.VX, Deutsche Bank AG (DBKGn.DE: Quote), Goldman Sachs Group Inc (GS.N: Quote), HSBC Holdings Plc (HSBA.L: Quote), JPMorgan Chase & Co (JPM.N: Quote), Morgan Stanley (MS.N: Quote), Royal Bank of Scotland Group Plc (RBS.L: Quote) and UBS AG UBSG.VX.

Other defendants are the International Swaps and Derivatives Association (ISDA) and Markit Ltd MRKT.O, which provides credit derivative pricing services.

Credit default swaps are contracts that let investors buy protection to hedge against the risk that corporate or sovereign debt issuers will not meet their payment obligations.

The market peaked at $58 trillion in 2007, according to the Bank for International Settlements, but shrank to $16 trillion seven years later as investors better understood its risks.

American International Group Inc's (AIG.N: Quote) CDS exposure was a major factor behind the 2008 federal bailout of that insurer.   Continued...

A man walks along Wall Street in New York September 18, 2008. REUTERS/Eric Thayer