We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Major US Banks Agree to $86.4M Settlement in Mexican Bond-Rigging Case
Read MoreHide Full Article
Key Takeaways
Six banks agree to an $86.4M settlement over alleged Mexican bond price and allocation coordination.
Earlier Barclays and JPMorgan settlements lift potential investor payments to $107.1M before fees.
The agreement needs court approval and resolve claims without admissions of alleged manipulation.
Mexican banking affiliates of six major global financial institutions have agreed to pay $86.4 million to settle a long-running U.S. antitrust lawsuit alleging manipulation of the Mexican government bond market.
The preliminary settlement involves affiliates of six banks including Bank of America (BAC - Free Report) , Citigroup (C - Free Report) , Deutsche Bank (DB - Free Report) and HSBC Holding plc (HSBC - Free Report) . Filed in Manhattan federal court on Friday, Aug. 14, the agreement would resolve the remaining claims in litigation that has been pending for roughly eight years. The settlement still requires approval from a federal judge.
Combined with earlier settlements by Barclays and JPMorgan Chase (JPM - Free Report) , the case is expected to produce $107.1 million in total payments before legal fees. Investors alleged that banks coordinated prices and allocations of Mexican sovereign bonds between 2006 and 2017, using trader communications to buy at artificially low prices and sell at inflated prices.
The case includes claims under the Sherman Antitrust Act and common-law unjust enrichment. Plaintiffs' attorneys could seek up to $28.8 million in fees.
Investors Allege Banks Manipulated Mexican Bond Prices
The lawsuit was brought on behalf of investors, including pension funds, that traded Mexican government bonds. Plaintiffs alleged that Bank of America, Citigroup, Deutsche Bank and HSBC participated in a broader scheme to coordinate prices and bond allocations between Jan. 1, 2006, and April 19, 2017. The allegations cited electronic chatroom communications among traders and included claims under the Sherman Antitrust Act and common-law unjust enrichment.
According to investors, traders allegedly coordinated transactions so participating banks could buy bonds at artificially low prices and sell them at inflated prices. The claims cited electronic communications among traders and were brought under the Sherman Antitrust Act and common-law unjust enrichment.
The case gained momentum in February 2024, when the U.S. Court of Appeals for the Second Circuit revived claims against the Mexican bank defendants. A lower court had dismissed the case on personal-jurisdiction grounds, but the appeals court found that investors had sufficiently alleged that the banks conducted business in New York through broker-dealers that sold billions of dollars of Mexican bonds to U.S. investors.
The appellate ruling did not determine whether the manipulation allegations were true. It instead allowed the lawsuit to proceed, paving the way for settlement discussions involving BAC, C, DB and HSBC.
U.S. Lawsuit and Mexican Probe Raise Broader Market Concerns
The U.S. litigation follows a separate investigation by Mexico's competition regulator, COFECE. In January 2021, the regulator said that it identified 142 illegal agreements involving seven banks and 11 traders in Mexican government-debt transactions between 2010 and 2013.
The Mexican proceeding included several institutions also connected with the U.S. litigation, while Barclays and JPMorgan Chase had already reached earlier settlements in the U.S. case.
The Mexican regulatory case and the U.S. investor lawsuit are separate proceedings with different periods and legal claims. Still, both increased scrutiny of trading practices in Mexico's sovereign-debt market.
The latest $86.4-million agreement remains subject to court approval. If approved, the agreement would resolve the remaining claims in the litigation. Together with the previous settlements involving Barclays and JPM, investors would secure $107.1 million in total, bringing the long-running antitrust dispute closer to an end.
What $86.4M Mexican Bond Settlement Means for Major Banks
The proposed settlement would remove a long-running legal overhang for Bank of America, Citigroup, Deutsche Bank and HSBC, allowing the banks to resolve the remaining U.S. claims without a trial or admission that the alleged manipulation occurred. Given the size and financial resources of these global banks, the settlement payments are unlikely to have a material effect on their overall capital positions or earnings. However, the agreement highlights the continuing legal, compliance and reputational risks associated with historical trading practices.
For BAC, C, DB and HSBC, the resolution should modestly reduce litigation uncertainty. Investors are therefore more likely to view the settlement as manageable legal expenses and a reduction in uncertainty rather than a development capable of materially altering the banks' near-term financial outlooks.
View the Zacks #1 Rank List
Image: Bigstock
Major US Banks Agree to $86.4M Settlement in Mexican Bond-Rigging Case
Key Takeaways
Mexican banking affiliates of six major global financial institutions have agreed to pay $86.4 million to settle a long-running U.S. antitrust lawsuit alleging manipulation of the Mexican government bond market.
The preliminary settlement involves affiliates of six banks including Bank of America (BAC - Free Report) , Citigroup (C - Free Report) , Deutsche Bank (DB - Free Report) and HSBC Holding plc (HSBC - Free Report) . Filed in Manhattan federal court on Friday, Aug. 14, the agreement would resolve the remaining claims in litigation that has been pending for roughly eight years. The settlement still requires approval from a federal judge.
Combined with earlier settlements by Barclays and JPMorgan Chase (JPM - Free Report) , the case is expected to produce $107.1 million in total payments before legal fees. Investors alleged that banks coordinated prices and allocations of Mexican sovereign bonds between 2006 and 2017, using trader communications to buy at artificially low prices and sell at inflated prices.
The case includes claims under the Sherman Antitrust Act and common-law unjust enrichment. Plaintiffs' attorneys could seek up to $28.8 million in fees.
Investors Allege Banks Manipulated Mexican Bond Prices
The lawsuit was brought on behalf of investors, including pension funds, that traded Mexican government bonds. Plaintiffs alleged that Bank of America, Citigroup, Deutsche Bank and HSBC participated in a broader scheme to coordinate prices and bond allocations between Jan. 1, 2006, and April 19, 2017. The allegations cited electronic chatroom communications among traders and included claims under the Sherman Antitrust Act and common-law unjust enrichment.
According to investors, traders allegedly coordinated transactions so participating banks could buy bonds at artificially low prices and sell them at inflated prices. The claims cited electronic communications among traders and were brought under the Sherman Antitrust Act and common-law unjust enrichment.
The case gained momentum in February 2024, when the U.S. Court of Appeals for the Second Circuit revived claims against the Mexican bank defendants. A lower court had dismissed the case on personal-jurisdiction grounds, but the appeals court found that investors had sufficiently alleged that the banks conducted business in New York through broker-dealers that sold billions of dollars of Mexican bonds to U.S. investors.
The appellate ruling did not determine whether the manipulation allegations were true. It instead allowed the lawsuit to proceed, paving the way for settlement discussions involving BAC, C, DB and HSBC.
U.S. Lawsuit and Mexican Probe Raise Broader Market Concerns
The U.S. litigation follows a separate investigation by Mexico's competition regulator, COFECE. In January 2021, the regulator said that it identified 142 illegal agreements involving seven banks and 11 traders in Mexican government-debt transactions between 2010 and 2013.
The Mexican proceeding included several institutions also connected with the U.S. litigation, while Barclays and JPMorgan Chase had already reached earlier settlements in the U.S. case.
The Mexican regulatory case and the U.S. investor lawsuit are separate proceedings with different periods and legal claims. Still, both increased scrutiny of trading practices in Mexico's sovereign-debt market.
The latest $86.4-million agreement remains subject to court approval. If approved, the agreement would resolve the remaining claims in the litigation. Together with the previous settlements involving Barclays and JPM, investors would secure $107.1 million in total, bringing the long-running antitrust dispute closer to an end.
What $86.4M Mexican Bond Settlement Means for Major Banks
The proposed settlement would remove a long-running legal overhang for Bank of America, Citigroup, Deutsche Bank and HSBC, allowing the banks to resolve the remaining U.S. claims without a trial or admission that the alleged manipulation occurred. Given the size and financial resources of these global banks, the settlement payments are unlikely to have a material effect on their overall capital positions or earnings. However, the agreement highlights the continuing legal, compliance and reputational risks associated with historical trading practices.
For BAC, C, DB and HSBC, the resolution should modestly reduce litigation uncertainty. Investors are therefore more likely to view the settlement as manageable legal expenses and a reduction in uncertainty rather than a development capable of materially altering the banks' near-term financial outlooks.