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Several big banks are being accused of manipulating interest rates – an allegation that could cost them billions of dollars in lawsuits if proved true.
The Wall Street Journal reported today that certain big banks are being investigated for manipulating interest-rate benchmarks, causing investors to lose money. That’s why dozens of institutions, private investors and lenders are coming out of the woodworks threatening to sue the banks for fudging the rates.
Bank of America (NYSE: BAC), Citigroup (NYSE: C), and JPMorgan Chase (NYSE: JPM) are among the big banks under investigation. The bad publicity has put a slight dent in their stock prices.
BAC and Citigroup shares had both fallen 0.75% as of 11:13 p.m. eastern. JPM shares were basically flat.
That’s not much of an impact. But the banks mentioned in the report are clearly lagging behind those that weren’t.
Shares of the three big U.S. banks not mentioned – Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), and Wells Fargo (NYSE: WFC) – have climbed by an average of about 0.45% today.
The real question is what effect the accusations of wrongdoing will have on those companies over the long haul.
With the lawsuits piling up, some of the accused banks may be forced to settle. According to the Journal, those settlements could cost the institutions billions of dollars. That wouldn’t be good for the bottom lines of banks still operating on relatively thin margins in the wake of the financial crisis.
If there’s anything to these interest-rate hiking accusations, they could be quite costly to some of America’s largest financial institutions down the road.
This is a story worth tracking if you’re a big-bank investor.