Banks score major win in private Libor suits

By Nate Raymond and Carrick Mollenkamp, Reuters

NEW YORK — The world’s biggest banks won a major victory on Friday when a U.S. judge dismissed a “substantial portion” of the claims in private lawsuits accusing them of rigging global benchmark interest rates. The 16 banks had faced claims totaling billions of dollars in the case, which had been considered the biggest legal threat that they faced aside from investigations being pursued by regulators in the United States, Europe and Britain. The banks include: Bank of America Corp., Citigroup Inc., Credit Suisse Group AG, Deutsche Bank AG, HSBC Holdings PLC, JPMorgan Chase & Co., Royal Bank of Canada, Royal Bank of Scotland and WestLB AG. They had been accused by a diverse body of private plaintiffs, ranging from bondholders to the city of Baltimore, of conspiring to manipulate the London Interbank Offered Rate (Libor), a key benchmark at the heart of more than US$550 trillion in financial products.

In a significant setback for the plaintiffs, U.S. District Judge Naomi Reice Buchwald in Manhattan granted the banks’ motion to dismiss federal antitrust claims and partially dismissed the plaintiffs’ claims of commodities manipulation. She also dismissed racketeering and state-law claims.

Buchwald did allow a portion of the lawsuit to continue that claims the banks’ alleged manipulation of Libor harmed traders who bet on interest rates. Small movements in those rates can mean sizable gains or losses for those gambling on which way the rates move. The ruling comes at a time when the banking industry is facing legal and regulatory challenges on multiple fronts, including how they originated and sold mortgage loans, as well as questions of whether some have become so big they pose a systemic risk to the global financial system.

While the door was left open for private litigants to refile lawsuits, Buchwald’s decision may make it more likely that banks will talk settlement with a significant win in their pocket. The decision also could cast doubt on some of the highest analyst projections about potential Libor damages, and quell some concerns that the banks have not reserved enough for litigation expenses.