HSBC, bondholders reach settlement over Libor rigging

Maria Nikolova

Bondholders are claiming that as a result of Libor manipulation they got artificially low returns on at least $500 billion of dollar-denominated debt whose interest payouts were linked to the benchmark interest rate.

Legal action against financial majors allegedly involved in the manipulation of the London Interbank Offered Rate (Libor) continues at full speed, with the latest piece of news on this front coming from the new New York Southern District Court and, in particular, an antitrust case involving HSBC Holdings plc (LON:HSBA) and a group of US bondholders.

According to a report by Reuters, the parties have managed to reach a settlement.

The docket for the case (1:11-md-02262) shows a letter about a settlement filed with Judge Naomi Reice Buchwald on Monday – May 15, 2017. The Judge has yet to approve the proposed settlement of which no details have yet been disclosed.

The bondholders are claiming that Libor manipulation has resulted in them getting artificially low returns on excess of $500 billion of dollar-denominated debt whose interest payouts were linked to Libor.

If approved, this would mark another HSBC settlement over similar claims after one was reached in January this year, when the bank agreed to pay $35 million to bring to a close a private US antitrust litigation over the alleged manipulation of the yen Libor and Euroyen Tibor.

In the UK, the Bank of England has been under fire after media reports alleged its involvement in Libor rigging. A recording obtained by BBC indicated that the Bank and the UK government applied pressure on UK banks to push Libor rates lower. In the recording, dating back to 2008, senior Barclays manager Mark Dearlove told Libor submitter Peter Johnson:

“The bottom line is you’re going to absolutely hate this… but we’ve had some very serious pressure from the UK government and the Bank of England about pushing our Libors lower.”

After the recording has been made public, there have been calls to further investigate the Libor scandal. In April this year, John McDonnell MP, Labour’s Shadow Chancellor, wrote to the Chancellor, Philip Hammond MP, demanding the opening of a public inquiry into the scandal of Libor interest-rate rigging.

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