In an unprecedented development, a U.S. judge dismissed a
significant part of the rate-rigging lawsuit that involved some of
the world's biggest financial institutions. The dropping of several
charges comes as a major triumph for the banks as they faced claims
worth billions of dollars as well as huge litigation
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U.S. District Judge Naomi Reice Buchwald in Manhattan dismissed
federal antitrust claims and partly rejected the petitioners'
claims of manipulation related to commodities. She also discharged
racketeering and state-law claims.
However, she allowed certain claims to proceed, which included the
loss endured by small traders who gamble on interest rates
movements. Any minor movement in interest rates has the capacity to
generate marked changes (either huge gains or huge losses)
depending on the direction of the rate changes.
A body of plaintiffs had dragged16 banks to court over charges of
manipulation of the benchmark interest rate - London Inter bank
offered Rate or LIBOR. Bank of America Corporation
( BAC ),
Citigroup Inc. ( C ), Credit
Suisse Group AG ( CS ), Deutsche
Bank AG ( DB
), HSBC Holdings plc ( HBC ), JPMorgan
Chase & Co . ( JPM ), Royal
Bank of Canada ( RY ) and The
Royal Bank of Scotland Group plc ( RBS ) are included in
the list of defendants. The rigging put nearly $550 trillion worth
of financial products in jeopardy.
The U.S. District Judge, in a 161- page opinion, stated that the
ruling came unceremoniously, as several of the banks including
Royal Bank of Scotland had already shelled out a hefty penalty in
the recent past to regulators in U.S, U.K. and Europe over similar
charges. However, she mentioned that the private plaintiffs failed
to meet several requirements under the statutes to file the
One of the lawyers for the petitioners stated that the plaintiffs
were considering several options like re-filing the case, amending
the current charges or even appealing against the judge's ruling.
The decision is likely to take some time.
The favorable ruling comes as a massive victory for the banks at a
time when these institutions are heavily burdened by multiple legal
and regulatory woes. The primary challenge is the repercussion of
the dubious sale of perilous mortgage securities prior to the 2008
The partial dismissal of this lawsuit has restricted the spiraling
expenditure stemming from LIBOR lawsuits to an extent. At present,
Barclays PLC ( BCS ), Royal Bank of
Scotland and UBS AG ( UBS ) have paid $2.5
billion in settlement to U.S. and U.K. regulators. Nearly a dozen
firms continue to remain under the lens.
Analysts had put the expected potential compensation to range from
$7.8 billion - $176 billion. The dismissal is expected to bring
down this mammoth figure and the banks' litigation expenditure,
thus delivering some reprieve.