The financial sector may have turned over a new ethical leaf in the last few years, but its atonement for past sins is proving lengthy – and painful. Nine of the world’s biggest banks settled a court case yesterday with US investors who lost out as a result of foreign exchange rigging, in what could be the start of a new wave of painful litigation.
Barclays, RBS and HSBC joined Citigroup, Goldman Sachs, JP Morgan, Bank of America, UBS and BNP Paribas to pay $2bn (£1.3bn) in a civil case in New York. The litigation is ongoing against another 12 banks, including London-based (for now) Standard Chartered.
Regulators in Britain, America and Switzerland have already taken a whopping $10bn in fines and settlements over forex rigging since November. Admitting guilt may have closed these big criminal and regulatory investigations, but it’s also paved the way for civil cases, with pension and hedge funds leading the calls for compensation.
Bank of New York Mellon and Bank of America paid out $180m each in law suits earlier this year, while JP Morgan and UBS coughed up $100m and $135m respectively. The 12 remaining defendants in the case partly settled yesterday face what’s likely to be another big hit, and that’s just one lawsuit, in one country.
‘There is no doubt that anyone who traded FX in or through the London or Asian markets – which transact trillions of dollars of business every day – will have suffered significant loss,’ said Anthony Maton, London Managing Partner of Hausfeld, the law firm conducting the case in New York. ‘Compensation for these losses will require concerted action in London.’
Is that the sound of thousands of City bankers gulping simultaneously? Of course, US law lends itself better to compensation claims through class actions, which we don’t have here in a meaningful sense, but it does open up the possibility of UK and European civil cases, which could drag on for years. The worst may be over for the banks, but they’re clearly not out of the woods yet.