Photographer: John Taggart/Bloomberg

Banks Ordered to Defend Suit Claiming Benchmark Rate Rigging

  • Suit by Alaska pension fund can proceed to trial, judge rules
  • Bank of America, Barclays accused of rigging ISDAfix rate

Bank of America Corp., Barclays Plc and a dozen more banks must face investor claims that they rigged a benchmark used in the sales of interest-rate derivatives and other financial instruments.

U.S. District Judge Jesse Furman in Manhattan Monday rebuffed the banks’ request to throw out antitrust lawsuits accusing the institutions of colluding to set ISDAfix, affecting trillions of dollars of financial instruments. The rate is used to set prices on interest-rate swap transactions, commercial real-estate mortgages and other securities.

An Alaska pension fund and other investors raised “plausible allegations that a conspiracy among the defendants existed,” Furman said in a 36-page ruling. He allowed antitrust and breach-of-contract contract claims to proceed to trial, while throwing out other allegations.

Starting in 2009, the banks used electronic chat rooms and other means of private communication to set ISDAfix, typically submitting identical rate quotes, investors said in their suit. They are seeking billions in losses tied to the alleged rate-fixing scheme.

Bill Halldin, a Bank of America spokesman, and Kerrie Cohen, a Barclays spokeswoman, declined to comment on the ruling. RBS officials didn’t respond to requests for comment. Spokespersons for the other banks declined to comment.

Many Banks

Investors also named as defendants Citigroup Inc., Deutsche Bank AG, BNP Paribas SA, HSBC Holdings Plc, Royal Bank of Scotland Group Plc, Credit Suisse Group AG, UBS AG, Goldman Sachs Group Inc., Nomura Holdings Inc., Wells Fargo & Co. and JPMorgan Chase & Co.

Representatives of JPMorgan and RBS didn’t respond to requests for comment. The other banks declined to comment.

ICAP Plc, which administered and brokered transactions that established the benchmark rate, is also named as a defendant. Guy Taylor, an ICAP spokesman, declined to comment on Monday’s ruling.

Some of the banks also have been accused of rigging other benchmarks, such as the London interbank offered rate, which is also used to value loans and securities around the world.

Libor Settlements

Last year, Barclays agreed to pay $120 million to a group of cities and other investors that bought Libor-based derivatives from the bank, to settle claims the London-based bank participated in a scheme to manipulate the benchmark to increase its profits.

Citigroup this year agreed to pay $23 million to settle claims it conspired to manipulate the yen Libor benchmark. The New York-based bank also agreed to cooperate with investors suing other banks over the rate-rigging claims.

The case is Alaska Electrical Pension Fund v. Bank of America, 14-cv-7126, U.S. District Court, Southern District of New York (Manhattan).

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