Fines & Penalties Monitor: August 2017

The total amount of fines, penalties and settlements paid out by the 18 largest institutions headquartered in the U.S. and Europe slightly increased in August, with three banks paying out a combined $195.5MM.  This increased our year-to-date total from $9.5B to $9.7B.  All three banks settled lawsuits involving allegations of rigging rates or markets for their own gain.

Citigroup settled for $130.0MM over accusations of conspiring with rivals to manipulate the London Interbank Offered Rate (LIBOR), a benchmark interest rate.  In 2011, a group of 27 plaintiffs had accused 16 banks of artificially lowering borrowing costs to ramp up earnings and appear financially healthy, which in turn lowered LIBOR.  This adversely affected individuals and institutions that had invested in bond markets and products tied to LIBOR.  Citigroup is the second bank to settle with the investors over allegations the benchmark rate was manipulated.  Barclays Plc reached a similar settlement in November 2015 for $120.0MM.  Citi did not admit any wrongdoing.

Bank of America Corp. and Deutsche Bank AG agreed to pay a combined $65.5MM to settle allegations of rigging the sovereign, supranational and agency bond market, which is valued at approximately $9.0T.  In May of 2016, the Boston Retirement System filed a lawsuit against Bank of America, Deutsche Bank and other international banks of “collusive activities to fix the prices of bonds sold to and purchased from investors in the secondary market.”  Bank of America agreed to pay $17.0MM and Deutsche Bank agreed to pay $48.5MM. Both banks denied any wrongdoing.

As we move into our final third of the year, total fines, penalties and settlements remain significantly less than last year, when fines had reached $17.0B by the end of August.  That being said, a number of the larger fines that we’ve captured in the past two years have been assessed towards the very end of the calendar year.  Continue to stay on top of industry risk by reading next month’s blog post.

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