Litigation worries seem to persist for major global banks. Recently, seven banking giants were sued by A Haverhill, a Massachusetts-based benefit fund. The banks were accused of maneuvering WM/Reuters rates, used for determining foreign exchange prices.
WM/Reuters rates are a benchmark for determining closing prices in the foreign exchange market. The banks in the lawsuit are Barclays PLC (BCS), Citigroup Inc. (C), Credit Suisse Group AG (CS), Deutsche Bank AG (DB), JPMorgan Chase & Co. (JPM), Royal Bank of Scotland Plc (RBS) and UBS AG (UBS).
The plaintiffs alleged that the banks’ manipulation of WM/Reuters rates impacted the value of financial transactions in the U.S., including foreign exchange trade. Further, the plaintiffs claimed that these also negatively affected the pensions and savings accounts that are dependant on the global foreign exchange rates.
Additionally, the Massachusetts-based benefit fund alleged that the banks violated Section 1 of the Sherman Antitrust Act. Earlier in June, according to a report by Bloomberg, traders at some banks shared information illegally, carried out their own trades prior to consumer instructions and sought control of WM/Reuters rates.
Manipulation in the foreign exchange as well as rigging of London Interbank Offered Rate (:LIBOR) by banks has been a cause of headache for the regulatory authorities. Last week, Fannie Mae (FNMA) filed a lawsuit against 9 major banks and British Bankers Association (:BBA) for their alleged role in rigging LIBOR. Earlier, Freddie Mac (FMCC) had alleged that the banks and BBA colluded together to reap profits from LIBOR manipulations from 2007 to 2010.
WM/Reuters rates are published hourly for 160 currencies and half-hourly for the 21 most-traded ones. Therefore, it is s a widely accepted standard. Given this, manipulation of the same will necessarily undermine the importance of the rate and result in negative financial consequences.
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