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Ten major banks, including Goldman Sachs Group Inc. (NYSE:GS), JPMorgan Chase & Co. (NYSE:JPM), and BNP Paribas SA (OTC:BNPQF), have agreed to pay a combined $46 million to resolve a long-standing lawsuit. The banks have been accused of conspiring to stifle competition in interest-rate swaps trading.
What Happened: The banks have denied any wrongdoing but have chosen to settle the antitrust lawsuit filed by investors over eight years ago. The settlement was submitted to a New York federal court on Thursday. The plaintiffs have requested that U.S. District Judge Paul Oetken grant preliminary approval, Bloomberg reported on Thursday.
Other banks involved in the settlement include Bank of America Corp. (NYSE:BAC), Credit Suisse Group AG which is now owned by UBS Group AG (NYSE:UBS), Barclays Plc (NYSE:BCS), Citigroup Inc. (NYSE:C), Deutsche Bank AG (NYSE:DB), Morgan Stanley (NYSE:MS), and NatWest Group (NYSE:NWG).
The lawsuit, which is part of a series of litigations brought by public pension plans against major banks, alleges collusion across various markets, including interbank rates, currencies, and credit default swaps. The banks are accused of blocking electronic trading platforms from entering these markets to control prices and increase profits.
"The settlement represents an excellent recovery for the class given the challenges and uncertainties of further litigation," the plaintiffs’ attorneys stated in their filing on Thursday.
Why It Matters: The settlement comes after the judge in December denied class-action status to the claims, which significantly weakened the case. Despite the denial, the settlement represents a significant recovery for the plaintiffs given the challenges and uncertainties of further litigation, according to Bloomberg Intelligence analyst.
The banks contended that investors suffered no harm, citing data indicating that many trades did not yield profits or resulted in losses. The plaintiffs disputed the occurrence of any trades with negative returns.
However, the judge declined to approve class-action status, stating that the plaintiffs did not effectively counter the defendants’ argument that there were numerous trades with zero or negative returns during the period in question.
Recently, the Federal Reserve's annual stress tests revealed that major banks, including JPMorgan and Bank of America, faced higher-than-expected stress capital buffers, leading to increased capital requirements.
This development follows a recent report on the surge in large bank stocks, including Goldman Sachs and JPMorgan, amid expectations of interest rate policy and optimism for an economic “soft landing.”
Moreover, the 2024 Fed stress tests indicated that while large banks might face greater losses in a severe recession, they still maintain strong capital positions.
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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote
