RiskFinancial CrimeSetback for Libor Suit against Banks

Setback for Libor Suit against Banks

Sixteen of the world’s largest banks have won the latest round of a legal battle in which claims in private lawsuits accuse them of rigging global benchmark interest rates.

The banks, which include Bank of America (BoA), Citi, Credit Suisse, Deutsche Bank, HSBC and JPMorgan Chase, potentially faced substantial payouts in the case, widely regarded as their biggest legal threat after investigations being pursued by regulators in the US and Europe, into alleged manipulation of the benchmark London Interbank Offered Rate (Libor).

The 16 banks were accused by a diverse body of plaintiffs, which include bondholders and US city authorities, of conspiring to manipulate Libor. However in a ruling delivered on 29 March, Judge Naomi Reice Buchwald of the US District Court in Manhattan, while acknowledging that her decision ”might be unexpected,” granted the banks’ motion to dismiss federal antitrust claims and partly dismissed the plaintiffs’ claims of commodities manipulation. She also dismissed racketeering and state law claims.

Judge Buchwald allowed a portion of the lawsuit to continue: the claims that banks’ purported manipulation of Libor had harmed traders who bet on interest rates and are vulnerable to both sizeable gains and losses from even a modest shift in rates.

The decision may also make it more likely that banks will have an advantage in potential settlement talks.

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