Banks face huge rigging claims after US payouts

hsbc tower

Barclays, HSBC and Royal Bank of Scotland are among nine banks that were revealed this week to have agreed to pay a total of $2.1 billion to settle with thousands of investors, including some of the world’s largest fund managers and corporations.

The Times reports that the settlement paves the way for even larger claims in London, the global centre of currency trading.

Lawyers at Hausfeld, the US law firm the led the case, said that they had already spoken to businesses and funds outside of America and could file a new lawsuit with the UK’s Competition Appeal Tribunal as early as October.

“The London foreign exchange market is much bigger than the US, so it is highly probable the settlements could be larger,” Michael Hausfeld, the chairman and founder of Hausfeld, said.

Christopher Burke, of Scott and Scott, another of the law firms involved in the US action, said: “Because the bulk of the market share in foreign exchange in the world takes place outside of the US, with London being the biggest market, I would expect that the numbers achieved outside the US might very well be larger.”

A London case could see investors from around the world, including Asia-based funds and businesses, bring their claims to the UK, as any of their foreign exchange transactions affected by the rigging are more than likely to have been processed through the City.

The other banks that have settled in the US are Goldman Sachs, BNP Paribas, Bank of America, JP Morgan, Citibank and UBS. The settlements, which are subject to court approval, were agreed this year but were made public in open court in New York this week.

The banks managed to reduce the total size of the settlement by agreeing to co-operate in an ongoing case in American courts against seven further banks, which have not yet settled. These include Standard Chartered, Bank of Tokyo-Mitsubishi, RBC Capital Markets, Société Générale, Deutsche Bank, Credit Suisse, and Morgan Stanley.

The $2.1 billion includes $180 million paid by Bank of America and $135 million from UBS. Goldman’s share of the settlement is understood to come to $129.5 million, while BNP Paribas is understood to have paid $115 million. The four banks said that the sums had been fully provisioned.

RBS and JP Morgan said that they had made full provision for their settlements, but would not disclose the amount. Citi, HSBC and Barclays declined to comment.

When the US complaint was filed in November, 2013, the investors bringing the action alleged that the banks had conspired since 2003 to manipulate the foreign exchange market.

As a result of co-operation obtained from settling defendants, the complaint was amended to claim a broader conspiracy and alleged that the banks used chat rooms, with names such as The Cartel, The Bandits’ Club, and The Mafia, to communicate with each other.

“[B]eing a member of certain chat rooms was by invitation only, indicating the secret nature of this conduct. These electronic chat rooms replaced the classic, smoke-filled backrooms of the past,” the complaint stated.

The settlements represent the latest development in the ongoing foreign exchange scandal. Last November, six international banks paid $4.3 billion in fines to UK and Swiss regulators. In May six banks, including Barclays and RBS, were fined $5.7 billion by American regulators.