Goldman Sachs Group, Inc., JPMorgan Chase & Co., Citigroup, Inc., HSBC Holdings, Plc, and other big banks have agreed to pay $1.87 billion in settlement amount to resolve its credit-default swap lawsuit, according to a report from Bloomberg.
These banks were alleged to have conspired to limit competition in the credit-default swap market.
Bloomberg reported that a dozen global banks alleged to have conspired to control the information about the multitrillion-dollar credit-default swap market in violation of U.S. antitrust laws.
The conspiracy also involved Markit Group Ltd., a market information provider that the banks owned stakes at.
The Press Examiner added that Daniel Brocket, a lawyer who represented many of the plaintiffs with the same complaints, said that the banks secretly met to kill proposals so that credit-default swaps aren't put onto exchanges.
The credit-default swaps that are put into exchanges make it transparent.
Bloomberg also stated that the settlement the banks made would avert a trial following years of litigation by hedge funds, pension funds, university endowments, small banks and other investors, who sued as a group.
One of the investors who sued with the group is the Los Angeles County Employees Association.
The investors told Bloomberg that the banks "made billions of dollars in supracompetitive profits" from their activity.
The banks took "advantage of the price opacity in the CDS market."
Two people familiar with the deal has told Bloomberg that the banks will be paying different amounts toward the settlement.
The size of the payment will be based on the banks' share of CDS trading, one of the people said.
The other defendants in the suit include Bank of America Corp., Morgan Stanley, Credit Suisse Group AG, Deutsche Bank AG, Barclays Plc, UBS Group AG, Royal Bank of Scotland Group Plc and BNP Paribas SA., according to Bloomberg.
The International Swaps and Derivatives Association (ISDA), a trade group representing participants in the over-the-counter derivatives market, was also sued.
Lauren Dobbs, a spokeswoman from ISDA, told Bloomberg that they are pleased that the "matter is close to resolution."
"ISDA remains committed to further developing CDS market structure to ensure the market functions safely and efficiently," she said.
The Press Examiner reported that the financial crisis, which affected millions of Americans, has prompted the government to tighten its regulatory laws.
These laws make the banking system more transparent.
