Reuters: Twelve major banks have reached a $1.865 billion settlement to resolve investor claims that they conspired to fix prices and limit competition in the market for credit default swaps, a lawyer for the investors said on Friday.
The defendants include Bank of America Corp (BAC.N), Barclays Plc (BARC.L), BNP Paribas SA (BNPP.PA), Citigroup Inc (C.N), Credit Suisse Group AG (CSGN.VX), Deutsche Bank AG (DBKGn.DE), Goldman Sachs Group Inc (GS.N), HSBC Holdings Plc (HSBA.L), JPMorgan Chase & Co (JPM.N), Morgan Stanley (MS.N), Royal Bank of Scotland Group Plc (RBS.L) and UBS AG (UBSG.VX).
Other defendants are the International Swaps and Derivatives Association (ISDA) and Markit Ltd (MRKT.O), which provides credit derivative pricing services.
Bloomberg: The banks “made billions of dollars in supracompetitive profits” by taking advantage of “price opacity in the CDS market,” the investors said.
The banks will pay different amounts toward the settlement, according to two people familiar with the deal. The size of each bank’s payment is based on its share of CDS trading, one of the people said.
The banks were also accused in the lawsuit of conspiring to sabotage a credit default swap exchange planned by hedge fund Citadel Group LLC and the CME Group Inc., a derivatives market operator. They agreed to boycott the new exchange as long as Citadel was involved, according to the lawsuit, as they considered the hedge fund a “threat.” As a result, potential buyers and sellers had no efficient way to find other potential participants for swaps, unless they were dealers.