Schwab's Claims Against Banks For Libor Manipulation Revived
Zacks Investment Research | Feb 27, 2018 04:21AM ET
The Charles Schwab Corporation (NYSE:SCHW) (NYSE:C) along with some of its mutual funds have successfully convinced the 2nd U.S. Circuit Court of Appeals in Manhattan to revive the lawsuit, which was filed against 17 banks and financial institutions, alleging them of manipulating the benchmark Libor interest rate.
The London Interbank Offered Rate, popularly known as Libor, is used by banks as a benchmark rate to set the interest rates for various financial instruments and is also the average rate at which major banks borrow money from each other.
Schwab claims that the banks had suppressed the Libor rates between August 2007 and May 2010, because of which its mutual funds that bought floating-rate debt during that period earned lower returns.
Talking in favor of Schwab, Circuit Judge Gerard Lynch recently said that he disagreed with the decision of a lower court judge made in October 2015, who had dismissed Schwab’s claims and hence the appeals court has remanded the case for further proceedings.
On Friday, Lynch, in his 64-page decision, said that District Judge Naomi Reice Buchwald was "wrong to assume, at the pleading stage, that Schwab was not harmed by, and may have even benefitted from, Libor manipulation."
Lynch also said that Buchwald was incorrect in concluding that she did not have jurisdiction over various claims made by Schwab under California law.
Schwab is seeking damages for $665 billion worth of transactions relating to these floating-rate instruments, which includes over $40 billion of debt issued by finance companies like Bank of America Corp. (NYSE:C) , Citigroup Inc. (NYSE:C) , Credit Suisse (SIX:CSGN) Group AG (NYSE:C) , Deutsche Bank AG (NYSE:DB) , HSBC Holdings (LON:HSBA) plc, JPMorgan Chase & Co (NYSE:JPM)., Royal Bank of Canada, The Royal Bank of Scotland Group (LON:RBS) plc, UBS Group AG and a few others.
Schwab’s shares have gained 32.9% in the past year, outperforming 21.5% growth of the Zacks Investment Research
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