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Barclays, others prepare for civil suits stemming from foreign exchange rate manipulation.

Byline: Zach Warren

On May 20, Barclays, Citigroup, JPMorgan Chase, RBS and UBS agreed to pay a combined $5.6 billion to settle allegations from U.S. and UK regulators that the banks manipulated foreign exchange rates and the London interbank offered rate (Libor). However, the banks may not be out of the woods when it comes to litigation quite yet.

The Financial Times reports that the five banks face a host of civil lawsuits stemming from the misdeeds, particularly after being provided a host of information from federal regulators. The New York State Department of Financial Services (DFS) and others have released the results of the investigation into Barclays and others, detailing exactly how the banks fixed the markets.

"In their attempts to manipulate these benchmarks in the chat rooms, Barclays FX traders exchanged information about the size and direction of their orders with FX traders at other banks, as well as coordinated trading, and discussed the spread between bids and offers which the banks were showing to customers," the DFS wrote in a consent order in which Barclays pleaded guilty to the charges. "The exchange of information among the traders at multiple banks via the use of chat rooms facilitated this type of conduct."


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Ed Coulson, a partner at the law firm Hausfeld in London, told the Financial Times that four of the banks (all but UBS) pleading guilty to the charges "creates or assists with the establishment of liability." He also added, "We are talking to a number of potential claimants, they run from the corporate with a corporate finance function to investment funds, pension funds, through to other various sophisticated investors."

Robin Henry, a financial disputes partner at law firm Collyer Bristow, argues that it's tough to prove damages in these cases, although the civil plaintiffs could move to have a foreign exchange contract rescinded, which would entitle them to claim back losses.

Litigation departments at major banks have been preparing for these lawsuits for a while. HSBC set aside $1.7 billion for one-off legal charges in November, and Deutsche Bank similarly set aside $1.3 billion for charges in October.

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Publication:Inside Counsel Breaking News
Geographic Code:4EUUK
Date:May 22, 2015
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