Bank Stock Roundup: Litigations Make Headlines; JPMorgan & Citigroup In Focus

Over the last five trading sessions, efforts by banks to resolve litigations dominated headlines. The biggest news pertained to the settlement of the allegations regarding foreign currency (‘FX”) market manipulation. Some of the major global banks were part of the settlement.

Apart from this, few other lawsuits were resolved, while a couple of cases were even dismissed by the court. Hence, on a whole, the last five trading sessions were dominated by litigations.

(Read the last Bank Stock Roundup for May 15, 2015)

Recap of the Week’s Most Important Developments:

1. The much anticipated settlement related to the FX market manipulation was eventually announced. In aggregate, major banks will be paying nearly $6 billion to the U.S. and U.K. regulators to settle various charges.

Regulators accused Citigroup Inc. (C - Analyst Report), JPMorgan Chase & Co. (JPM - Analyst Report), The Royal Bank of Scotland Group plc (RBS - Snapshot Report), UBS Group AG (UBS) and Barclays PLC (BCS - Analyst Report) of conspiring for manipulation of the FX market. Aside from UBS Group, Citigroup’s main banking subsidiary, Citicorp, and the parent companies of JPMorgan, Barclays and Royal Bank of Scotland pleaded guilty to the U.S. Department of Justice (“DOJ”) for the aforesaid charges.

Notably, UBS Group pleaded guilty for breaching its Dec 2012 non-prosecution agreement (“NPA”) over manipulation of the Libor benchmark interest rate. Apart from these five banks, Bank of America Corp. (BAC - Analyst Report) avoided guilty plea, although it was fined (read more: Major Banks Penalized for FX Market Rigging, Plead Guilty).

2. In a major relief to U.S. Bancorp (USB - Analyst Report) and BofA, the U.S. District Judge in Manhattan dismissed three lawsuits. The cases pertained to the allegations that banks failed to perform their duties as trustees for residential mortgage-backed securities (“RMBS”). Nevertheless, the judge permitted all plaintiffs to re-file some of their claims (read more: BofA & U.S. Bancorp Win Dismissal of 3 RMBS Lawsuits).

3. The Bank of New York Mellon Corp. (BK - Analyst Report) has reached a settlement in principle over FX-related class action lawsuit that alleged violations of securities law. The company disclosed this in a filing with the Securities and Exchange Commission (“SEC”).

Under the terms of the settlement, BNY Mellon will be paying $180 million to settle the allegations. This will result in a pre-tax charge of $50 million in the second quarter of 2015.