Banks are bracing for hundreds of millions of pounds in new claims for foreign exchange manipulation from class-action lawsuits triggered by last week’s vast market rigging fines.
Barclays, Royal Bank of Scotland and four other banks were ordered on Wednesday to pay $6bn (£3.84bn) by UK and US authorities. The Barclays penalty represents the biggest bank fine in British history. The regulators, detailing how traders gathered in chatrooms using monikers such as “The Cartel” and “Coiled cobra” to rig the $5.3 trillion-a-day currency market, also forced the banks to plead guilty to criminal charges. Lawyers say that the fines, as well as an investigation from the European Commission, could be a springboard to damaging civil litigation in the UK and Europe. Some lawyers believe settlements could ultimately exceed the fines handed out by regulators, although the total bill will depend on how claimants assess the scale of damages they have suffered.
Traders at the banks colluded to manipulate currency benchmarks used to peg foreign exchange orders from corporate clients, meaning they made huge profits while clients were ripped off.
Several class-action lawsuits have been filed and settled in the US, with banks paying out hundreds of millions in compensation. Citigroup, one of the six banks to be fined last week, said on Wednesday that it had agreed $394m of payments to settle private cases in the US, and RBS said it had reached a deal, without revealing how much it will pay. US laws make it easier to arrange such cases, but firms in the UK are now canvassing support for action on this side of the Atlantic. Law firm Hausfeld, which has been involved in several class action cases in the US and has secured settlements worth $800m, is drumming up support from institutions in the UK and Europe. It says court cases are expected on the continent in the coming months.
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