Some of the world’s most influential banks are under the spotlight and face antitrust lawsuits that accuse them of deliberately engineering an interest-rate benchmark which negatively impacted investors in Libor. This investigation is expected to shatter a lot of glass ceilings and potentially have banks fork out triple the amount, if the investors win their claims.
Numerous banks, including HSBC Holdings Plc, Bank of America Corp, Barclays Plc, Royal Bank of Canada and Royal Bank of Scotland Group Plc are some those that are facing the imminent lawsuit in New York City.
In recent months, $9 billion in fines was paid from twelve firms in order to resolve their participation in the rigging of the key interest benchmark. If you consider that Libor works with trillions of dollars, this lawsuit could demand that banks pay back billions more. This type of corruption is seriously punished against under US law and could very well bankrupt 16 of the world’s top financial banks.
A ruling by District Judge Naomi Reice Buchwald from 2013 was overturned by the appeals court, one that claimed the investors did not have enough evidence to prove they were negatively affected to a limit that would enable them to file a lawsuit under the antitrust law. The investors appealed that from the beginning of 2007 the banks conspired to reduce the Libor interest rate so that they would not have to pay out more on those investments connected to the benchmark. These investments included collateralized debt obligations and forward rate agreements.
In the new lawsuits, the judge may still overrule the cases if there is still not enough evidence to show that these investors were hurt during these processes. The main reason for it not passing would be that their claims for compensation are too high, or too speculative.
When questioned about the situation, JPMorgan, Bank of America, HSBC and RBC declined to comment.
The question remains, will the system protect or harm those that oppose it?