A couple of Canadian banks, Royal Bank of Canada (RBC) and TD Bank, have signed onto settlements that resolve a proposed class action that arose following regulatory investigations in Europe and the U.S. into alleged collusion in a segment of the over-the-counter (OTC) bond markets.
In 2015, regulatory authorities in Europe and the U.S. launched investigations into suspected manipulation in the global market for supranational, sub-sovereign and agency bonds (SSA bonds).
Ultimately, the U.S. Department of Justice (DoJ) and the U.K.’s Financial Conduct Authority (FCA) closed their investigations without alleging any wrongdoing, but European regulators alleged that four banks — Bank of America Merrill Lynch, Deutsche Bank, Credit Agricole and Credit Suisse — breached competition laws.
And in 2021, three of the banks were fined a combined €28.5 million. Deutsche Bank was granted immunity for cooperating with the investigation.
In the wake of the regulators’ investigations, investor class actions were filed, first in the U.S., and later in Canada, alleging that 11 of the world’s largest financial institutions improperly shared trading information in an effort to rig the price of SSA bonds.
In the U.S., three banks — Bank of America, HSBC and Deutsche Bank — reached a US$95.5-million settlement of the investor class action against them. But in March 2020, a U.S. district court dismissed the claims against various other banks that had been named in that suit.
Now, the proposed class action in Canada — which sought $1 billion plus punitive damages — has been settled for just $6.5 million.
Two of the banks settled for just over $2 million in 2020, and settlements with the nine others, including RBC and TD, were approved by the Federal Court of Canada in November 2024.
The nine settling banks, which denied the allegations, will pay a combined $4.2 million to resolve the case.
The bulk of the settlement money, or about $2.2 million, is coming from Deutsche Bank. RBC and TD, which were not implicated in any of the regulatory investigations, are paying $250,000 each; while the other banks are paying between $150,000 and $500,000 each to settle the case.
“The financial terms of settlement are, as the plaintiffs acknowledge, relatively modest. But in the context of the likelihood of success and the costs and risks of going forward to a certification motion, the financial terms are more than satisfactory,” the federal court said in its ruling approving the settlements.
After legal fees and other expenses, the most recent settlements will leave $3.1 million to be shared among investors.
However, that money will largely be shared by institutional investors, as they are the primary participants in the global SSA bond markets, and participation in the settlement is restricted to investors who made SSA bond trades worth at least $10 million.
For investors that qualify under the settlement, their payouts will be pro-rated based on the total value of transactions that investors were involved with in SSA bonds in the years covered by the settlement, from 2005 to 2015.
The deadline to participate in the settlement is July 25.